Monthly Inflation Jumps for March 2014

The current CPI for the month of March was 236.293 which resulted in monthly inflation being up 0.64% in the month of March causing the Annual inflation rate to rebound from 1.13% up to 1.51% nearly reaching January’s 1.58%. And the Moore Inflation Predictor’s inflation forecast is for another huge jump this month taking the inflation rate to over 2%.

In other news:

We are in the process of upgrading and redesigning the site in an effort to make it easier to use and as my webmaster says “more responsive” which means that if you have a tablet or even a smart phone you should be able to read it easier. If you are on a full sized screen and want to see what happens you can drag the side of your window smaller and watch as the site adjusts to the smaller screen size. It’s not perfect but is kind of cool to watch. I guess I’m getting old. Another new feature is our scrolling ticker bar at the top of the page which takes the place of our inflation box. This should give us a bit more space.  We have also rearranged the navigation and pull-down menus so we apologize to our long time visitors it may take a bit of getting used to but hopefully it will make navigation easier in the long run. And you may still find some old style pages here and there but we are working on it, so give us time…

Back to Inflation News:

The big gainers in inflation this month were Energy with the cost of gas going up 5.1% in a single month and Natural Gas up a whopping 7.1% for the month and 16.4% annually.  Other big gainers were food items in the category of “Meat, Poultry, Fish and Eggs” which was up 1.2% for the month, and Dairy products which were up 1%. Airfares were up 1.6% and hospital services were also up 0.5%.

Annual_Inflation_chart_sm Looking at the Annual Inflation rate chart we can see the jump in the inflation rate. (Click the chart to see the full article and a larger version of the chart). From this chart you can see the effects of Quantitative Easing in the orange shaded regions and that although QE1 and QE2 resulted in a rebound in inflation so far QE3 has had little or no effect. Although as we mentioned above the Moore Inflation Predictor is forecasting a rather large jump over the next two or three months.

 

The Misery Index

US_Misery_Index_Mar_2014The misery index is up with the official unemployment rate flat for the month at 6.7% but the inflation rate is up from 1.13% to 1.51% taking the misery index from 7.83% to 8.21% although some recent research indicates that unemployment should be more heavily weighted than inflation. The recent report called “Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness found that unemployment causes 1.7 times as much misery as inflation and so the misery index should actually be calculated by multiplying unemployment by 1.7 and then adding it to inflation. This additional weighting would indicate why this recent recession with low inflation but high unemployment has been harder than the numbers would indicate.

 

NYSE ROC

Last month we said, “The New York Rate of Change chart has generated a sell signal which we are taking seriously.” And in the month since, the market has been quite volatile showing some weakness, so caution is still advised.

NASDAQ ROC

Last month, NASDAQ was still in buy territory and we said, “but the most recent  peak is looking very scary. Caution is advised.” and this month it has generated a sell signal and the similarity in the chart pattern is eerily similar to the peak in 2008. Sell signals are rare, so we definitely pay attention and so we  are out of the market and playing it cautious.

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Why the Fed Does Not Control Inflation and Deflation

HappyBirthdayFEDAlthough we may not always agree with Steve Hochberg’s conclusions the following video contains some very thought provoking ideas accompanied by some charts that you probably haven’t seen anywhere else.  It’s interesting to note the quadrupling of the FED’s leverage over the years since 2008 and the amazing lack of inflation associated with it. Check out this excellent six-minute video clip by Elliott Wave International’s Steve Hochberg… at the Orlando Money Show.

Despite the Fed’s leverage and its attempt to inflate throughout the economy, the deflationary pressures in the U.S. are overwhelming.


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This article was syndicated by Elliott Wave International and was originally published under the headline Why the Fed Does Not Control Inflation and Deflation. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Is the Federal Reserve Right About Inflation?

The Federal Reserve

The Federal Reserve serves as the Central Bank of the United States, and whether you realize it or not, it plays an active role in the lives of every American. It makes decisions about monetary policy and interest rates that have a direct impact on the market and an indirect impact on everyone. The FED uses inflation targets to determine how much they can devalue (inflate) the currency. Many people believe that they created a massive money printing scheme cryptically called “Quantitative Easing“since QE1 converted almost worthless mortgage backed securities into currency.

The Fed regularly issues statements about how inflation isn’t really as bad as everyone says it is. [Read more...]

Annual Inflation Down in February

Current Inflation Commentary-

The U.S. Bureau of Labor Statistics has released the Annual Inflation rate today. For the year ending in February, inflation was 1.13% down roughly 1/3rd from 1.58% for the year ending in January.

Monthly inflation was relatively high at 0.37% in January and the same again in February. This is consistent with the historical trend of low inflation in the 4th quarter and high inflation in the first quarter of the year.

Inflation ChartClick for larger image

The Consumer Price Index came in at 234.781 in February which was  [Read more...]

What is the Misery Index?

The misery index was created by economists in an effort to quantify how bad the economy is based on cold hard numbers. In many ways, it can be argued that suffering is not quantifiable, after all how do you measure the pain associated with starvation, sickness, disease, homelessness, war, lawlessness and all the evils of society?  But in economic terms economist Arthur Okun developed a simple but brilliant method of determining how miserable people were economically.

The Misery Index and Unemployment

US Misery IndexThe first component of the misery index is unemployment. Okun reasoned that if a lot of people were unemployed, that would make the country as a whole feel poorer and so they would be less well off. Also a side effect of just knowing that the unemployment rate is increasing is an increase in fear that people might lose their own job as well and this will cause them to cut back on their spending of discretionary items and to save more “just in case”. As a result, more businesses will be hurting from the lack of spending and the misery will compound.

The Misery Index and Inflation

The second component of the misery index is inflation. Inflation is an increase in prices. The primary cause is an increase in the money supply “Printing Money” at a greater pace than the growth of the “GDP” i.e. Gross Domestic Product. If prices increase  more rapidly than salaries individuals will have to reduce their consumption resulting in [Read more...]

U.K. Historical Price Converter Added

UK price conversionThis month as a service for our friends in the U.K. we have added a U.K. Historical Price Converter. This handy little calculator will tell you the equivalent value of any prices from 1751 to the present.

It is based on the “Retail Prices Index” which was instituted in Great Britain in 1947 in an effort to determine how much the war was affecting prices. The data was later “backdated” to include prices back to 1751 by Jim O’Donoghue, Louise Goulding, and Grahame Allen in a paper entitled ‘Consumer Price Inflation Since 1750’.

In it they state that, their article presents:
a composite price index covering the period since 1750 which can be used for analysis of consumer price inflation, or the purchasing power of the pound, over long periods of time.”

The Data  is a Composite of Several Data Series

They created this composite price index by linking together data from a variety of different sources. For the period of 1947 to the current day they chose the retail prices index (RPI).

1870-1947

Prior to 1947 since there was no national index they used [Read more...]

Inflation was Up Slightly in January 2014

Current Inflation Commentary-

The U.S. Bureau of Labor Statistics has released the Annual Inflation rate today. For the year ending in January, inflation  was 1.58% up very slightly from 1.50% for the year ending in December 2013.

Annual inflation is made up of 12 monthly inflation components and although monthly inflation was virtually Zero for December 2013 and rose to 0.37% in January. This fits well with the historical trend of low inflation in the 4th quarter and high inflation in the first quarter of the year.

Annual Inflation Chart

The Consumer Price Index came in at 233.916 in January which was actually [Read more...]

Commodity Prices Falling Despite QE

Traditional wisdom tells us that when the money supply expands the price of commodities rises. Today Robert Prechter takes a look at what has actually happened to commodity prices since 2008 during a period when theoretically the FED has been pumping up the  money supply. ~Tim McMahon, editor

Commodities Falling Despite QE: What Does That Mean?

Robert Prechter: “Charts tell the truth. Let’s look at some charts.”

By Elliott Wave International

During QE3, the latest round of the Fed’s quantitative easing, the stock market rose. We all know that.

But did you also know that commodities fell?

That’s right: QE3 had zero effect on commodities — or maybe even a negative effect. In fact, an unbiased observer of the trend might conclude that the Fed drove commodity prices down.

That, of course, would be heresy to investors who believe that the Fed’s actions have been inflating all financial markets.

What should you make of the fact that commodities have failed to respond to the massive, historic, unprecedented central-bank stimulus? We see it as a red flag.

What’s more, you may be surprised to know that not one of the Fed’s stimulus programs — QE1, QE2 and QE3 — pushed up commodity prices.

As Robert Prechter, the president of Elliott Wave International, wrote in his November 2013 Elliott Wave Theorist, “Charts tell the truth. Let’s look at some charts.” These four charts and analysis that he published in May, July, and November 2013 tell the story:

(Robert Prechter, July 2013 Elliott Wave Theorist)

The CRB index of commodities has been losing ground for more than two years, as shown in Figure 3. Notice the four short arrows on the chart. Based on their positions, you might think they would mark the timing of accurate sell signals generated by a secret indicator. But there’s no secret indicator. These happen to be the times at which the Fed launched its inflationary QE programs!

AFFA-CRBIndexFig3-1

Investors almost universally take news at face value rather than [Read more...]

Lawsuit Settlement Inflation

Our society is becoming increasingly litigious with people suing for almost anything. And lawsuit amounts have skyrocketed over the last 50 years. One typical example is in the asbestos litigation category.

Although, asbestos use was halted in the 1970s, due to the long period before symptoms of asbestos damage shows up, asbestos related lawsuits are still prevalent. In the United States, approximately 600,000 people have filed suits claiming damages caused by asbestos, and asbestos litigation has become the largest mass tort in history.  Despite the decline in the number of people diagnosed with asbestos related diseases (such as mesothelioma cancer) since the 1990s, asbestos litigation has seen a dramatic increase in settlement payout amounts.

The Trend in Rising Settlement Amounts

Law Suit InflationOne of the first asbestos lawsuits was Borel v. Fibreboard Corporation, in which Clarence Borel won $13,000. More recently,  in 2003, two settlements, one for $47 million, and another for $250 million, were awarded to victims. The latter two settlements are the largest known asbestos-related litigation settlements in history. In 2011, a settlement of $10.5 million was also awarded to a victim with asbestos-related health problems. If Mr. Borel were alive he would find the million dollar amounts that are now involved in settlements hard to believe.

Changes in Inflation Contribute to Large Settlements

The rising settlement amounts in asbestos cases can be at least partially attributed to inflation. Borel was diagnosed with an asbestos related disease in 1969. Since that year, inflation has accounted for a large change in the value of a dollar. The $13,000 that Borel received is equivalent to $82,518.83 today. A $13,000 settlement would not be acceptable today, especially with the rising costs of health care but even $82,000 is no where near $10 million. Settlements are meant to provide compensation for any out-of-pocket funds that people have had to use to treat their asbestos-related diseases. But modern day settlements are much higher than what can be accounted for by monetary inflation alone.

Companies Declare Bankruptcy; Courts Set Aside Money for Victims

After Borel won $13,000 against Fibreboard Corporation, he decided to sue 11 more asbestos producing companies. When he won, he set a precedent for asbestos victims. Soon after, those who had been exposed to asbestos and had asbestos related symptoms began going after asbestos producing companies in the courtroom. The companies couldn’t handle the wave of lawsuits: in 1982, the first asbestos company declared Chapter 11 bankruptcy. Many others followed suit. As more and more companies went bankrupt, however, the courts began setting aside money for future compensation for those affected by asbestos.

Settlements Save Time, Money, and Stress for Companies

As mentioned Borel set a precedent for asbestos victims. Going further, he (or his lawyers) actually changed the course of personal injury lawsuits. Today, it is nearly impossible for a person to lose a case against an asbestos company, assuming that they have actually suffered damages. Asbestos lawyers have a high success rate, which has contributed to the increased number of asbestos related litigation firms. Going to trial can take years, and requires a large amount of time, money, and stress for both sides involved in the suit. Rather than spend the money and time in a courtroom, companies are opting to pay out settlements to those who take legal action against them.

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About the Author:

Blake Littleton is a freelance writer primarily interested in tort based litigation. Should you need assistance with an asbestos exposure case, Blake recommends Shrader Law, a trusted law firm in the area of asbestos litigation.

Image courtesy of Suphakit73 / FreeDigitalPhotos.net

Current Inflation Commentary for December 2013

Current Annual Inflation Commentary

Annual Inflation:

Annual inflation rose was 1.24% in November and rose to 1.50% in December.  Monthly inflation for December 2013 was -0.01 or virtually Zero.

Going by the Consumer Price Index which was 233.049 in December, 233.546 in October and 234.149 in September prices were “rolled back” to below June levels when they were 233.504 but greater than May when they were 232.945. Annual Inflation was 1.50% in spite of the FED buying $85 Billion a month in Bonds lending more credence to Robert Prechter’s Deflationary scenario. You can get Robert Prechter’s 90 page deflation survival guide free here.

Historically monthly inflation rates tend to be lower in the second half of the year and often are negative ( deflation) in the fourth quarter (October, November and December) of the year. As a matter of fact, in the months since January 1954 there have been 47 negative months in the July through December months. So it appears that the majority of inflation occurs in the first half of the year and then moderates for the second half. One possible explanation is that during the fourth quarter many stores hold massive sales (think Black Friday) to reduce inventory before year end.

See our full Annual Inflation Commentary and Chart for more information. You also may be interested in Complete list of monthly inflation rates since 1913 . See the Misery Index for the combined effect of Unemployment and Inflation. If you are wondering how to Calculate the Inflation Rate ? Or you can simply use our Inflation Calculator to do the calculations for you. For more Inflation Calculators we provide a variety of  tools.