How the American bankers destroy the world

[Silence Sky]

think of it this way;

unless the consumer is a mindless jellyfish (though this may be true for some) who repeats his habits from 1950 to 2050 and beyond, and eats wanton mee everyday, how is basing your calculations of inflation going to prove anything? sure, wanton mee may be costing 0.50 last year, and today it costs 3.00. so? are you telling me if the wanton mee sellers jack up their prices you are going to suck your thumb and pay? or are you going to go to the chicken rice seller who only jacked up his price to 1.00? consumers can ADJUST their preferences in response to varying increment in prices. things are also different. saying that buying a car in 1960 is the same as buying a car in 2008 is wrong in so many sense of the word, technologies, research and a lot more has gone into the new car of today to make it a much more valuable asset compared to what it would have cost in 1960, so even IF it costs more in real terms, IT COULD BE JUSTIFIED.

Let's not get complicated here.
I understand you are talking about subsitution, if Coke becomes too expansive I drink Pepsi lor. But shouldn't we be evaluating the effectiveness of CPI in measuring inflation and costs of living instead?
CPI basket consists of basic staple in our daily lives. We have very little alternative or none at all when it comes to housing, transport, sugar and flour. Wanton mee is not important lar.
When the CPI increases, I am very sure it will affact us in some ways.

 

[Silence Sky]

no, but neither should any smart pants present these as an accurate representation

my point was that cpi =/= inflation, and would tend to overinflate values

i like how you selectively reply, why should i waste my time making wholesome, meaningful replies to one who needs to sustain his own virtual ego? even the threadstarter has not defended his own words as much as you have, it is ironic, and i do not think i really need to take this further, it only proves many things which i shall not say here. cheers.

See.. There you go again...
I am just asking questions only, I where got words to defend? :bsmilie:
Because you say some price constant, some go down, some go extremely high, makes me think of Stock Market index (Simliar formula). So I ask you the question lor..
Also because I know you are formally trained in Economics meh.

 

[night86mare]

Let's not get complicated here.
I understand you are talking about subsitution, if Coke becomes too expansive I drink Pepsi lor. But shouldn't we be evaluating the effectiveness of CPI in measuring inflation and costs of living instead?
CPI basket consists of basic staple in our daily lives. We have very little alternative or none at all when it comes to housing, transport, sugar and flour. Wanton mee is not important lar.
When the CPI increases, I am very sure it will affact us in some ways.

you still don't get my point, do you

the main reason why the cpi is unreliable is because of the weights it uses

there is another thing called the gdp deflator, which is equally ridiculous, it uses final year weights. directly translating money and goods today to the goods of tomorrow , like in my car example.. using the goods of yesterday, or the goods of tomorrow are silly in both ways.

another much stronger and extreme example would be.. saying that laptops cost more than they did in the past. or laptops cost a lot less in the past than they did today. so? what can you do with the laptops of today? what can you do with the laptops of yesterday? similarly, if there is a new technology which enables laptops to be mass produced at $1 each, so? does it mean that from yesterday to today, there was massive deflation?

certainly when cpi increases there MAY be a loose link that actual inflation has increased too. but even then, the amount by which it increases by should be taken with a huge pile of salt. even if you do take a very very reliable bundle as a basis for comparison:

1) there is no guarantee that your bundle reflects the appropriate level of inflation happening, based on cpi values

2) who's to say that you can't take another equally reliable bundle? and what basis is there for comparison with other countries? america's staple might be bread and potatoes, singapore's staple might be rice. do you really think that taking a bundle of bread, rice and potatoes is going to be a solution? there is no solution to this.. and we could easily argue that the bread and potatoes pricing will affect americans a lot more, than singapore.. vice versa for rice.

last of all, inflation should not be seen as a huge evil.

take for example - xiao ming earns $10 per month today. his bundle of rice, flour and eggs costs $8. suddenly his hometown is hit by a plague, in desperation due to short supply of labour, the employers start paying him $50 per month to not run and stay and work and produce goods in their factories. due to shortages his bundle now costs $16. is xiao ming's standard of living, measured at face value, reduced even though there is massive inflation? he can purchase 3 bundles instead of the original single one. so his standard of living, ignoring the plague, could be said to be higher!

there are many other factors than epidemics that can cause such a scenario to happen, or other scenarios where the notion that high inflation is bad for the individual can be easily disproved and debunked.

 

[night86mare]

See.. There you go again...
I am just asking questions only, I where got words to defend? :bsmilie:
Because you say some price constant, some go down, some go extremely high, makes me think of Stock Market index (Simliar formula). So I ask you the question lor..
Also because I know you are formally trained in Economics meh.

no interest in that index, i have no knowledge in that, so no comment

nonetheless, models and models, equations are rough estimates, we must ALWAYS remember that, and not be overcome with hysteria and joy and disbelief whenever figures are presented. if economists or whoever came up with these formulae were so accurate, the world would be under their dominion long ago.

won't actually call myself formally trained at all.. maybe wait a few more years, shrug. even then, might probably have only touched the surface. isn't all knowledge like that after all - but what little i know, i know that the cpi's methodology of calculation does not seem right to me, neither does it seem right to majority of the economists today.

 

[night86mare]

Do note my first line: "This is written along the lines of my favorite TV show, Heroes."

The current saga is worth making into a movie. Like 'Heroes 2', the show began by showing viewers how the world look like in future (humans wiped out by virus) and then the heroes moved back in time to try to prevent this from happening....

What I did was paint a possible bleak future but it may not happen. Think there are enough smart people in this world who could step up and prevent this from happening. However, currently things are getting 'out-of-hand' ---- US$ still dropping, oil still going higher, news on the banks still not getting better. People said US now in recession. News in Singapore that a big foreign buyer of a property project has let their option lapsed .... foreigners bot 6000+ homes in Singapore last year but if their home country property dropped, will they let go here?

there have been doomsayers as early as it has been documenated, for every regime, for every piece of history.. not all of them are wrong, but not all of them are right.. but what is true is that generally

worry is a rocking chair which gets you nowhere. worry coupled with positive action is the one which will tide one through bad times.

so relax - just plan for the rainy days which are impending.. make sure that you are shielded to the best of your abilities.. at least you can answer to yourself, no?

 

[Silence Sky]

Evertime I tot I understand only to be confused again.
Let me think about those points again and see if I got further questions.

One last question for the night.
Why CPI is so widely used since it is so silly? :think:

 

[zhixiong]

Evertime I tot I understand only to be confused again.
Let me think about those points again and see if I got further questions.

Go take a degree course in Economics to get more confused!!

I remember that during my last Economics tutorial many years ago, the professor said, all he had taught are just static theories and models, the real world is dynamic so almost all that he had taught are not applicable.... Ha Ha.

Ignorance is usually a bliss.....

 

[night86mare]

Evertime I tot I understand only to be confused again.
Let me think about those points again and see if I got further questions.

One last question for the night.
Why CPI is so widely used since it is so silly? :think:

it is?

maybe it is just a compromise, after all, there is a loose link

just like gdp per capita is also not a very accurate predictor of life quality/living standards but there is no doubt that countries with higher values will have generally higher living standards, though it all depends on the extent of differentiation.

 

[night86mare]

Go take a degree course in Economics to get more confused!!

I remember that during my last Economics tutorial many years ago, the professor said, all he had taught are just static theories and models, the real world is dynamic so almost all that he had taught are not applicable.... Ha Ha.

Ignorance is usually a bliss.....

that is right. in the end the accurate models actually have a lot of restrictions/parameters set on them.

but at least there is a tool for prediction.. and models have improved a lot since the 1960s. we recently learnt about how stabilisation policies in the past used to screw up things more than help.. because by the time they were implemented.. they amplified the effect of recovery which ended up in undesirable state also.

for example, you put up a policy to target expected massive inflation.. by the time you have implemented it, the inflation cycle is more or less over and you end up amplifying deflation.. etc etc so on so forth.

 

[Tiger-in-the-woods]

Are you watching the carnage right now with Bear Stearns ? Ouch... BSC down 50% at the moment...

 

[s598719]

Are you watching the carnage right now with Bear Stearns ? Ouch... BSC down 50% at the moment...

Yeah. Banks do not tust banks anymore ...... so bank lending to each other has tightened up

Bush said "Our economy is obviously going through a tough time. It's going through a tough time on the housing market and it's going through a tough time on the financial markets".

Former govt economist, Fieldstien said that US entering severe recession [reuters.com].

US is US$11 trillion economy; Europe is $12 trillion economy with some parts already in recession; Asia is $6 trillion economy and still booming. Wonder if Asia can keep going strong in the face of all these?

According to my economics guru, credit [available from banking system] is the wheel that turns the economy. Looks like the wheel is turning a bit slow now.

 

[Tiger-in-the-woods]

So far, the only say they are in a period of 'slow growth'.. they have not use the 'R' word yet

Guess they are trying to talk their way of out it...

Former govt economist, Fieldstien said that US entering severe recession [reuters.com].

 

[Silence Sky]

you still don't get my point, do you

the main reason why the cpi is unreliable is because of the weights it uses

there is another thing called the gdp deflator, which is equally ridiculous, it uses final year weights. directly translating money and goods today to the goods of tomorrow , like in my car example.. using the goods of yesterday, or the goods of tomorrow are silly in both ways.

another much stronger and extreme example would be.. saying that laptops cost more than they did in the past. or laptops cost a lot less in the past than they did today. so? what can you do with the laptops of today? what can you do with the laptops of yesterday? similarly, if there is a new technology which enables laptops to be mass produced at $1 each, so? does it mean that from yesterday to today, there was massive deflation?

certainly when cpi increases there MAY be a loose link that actual inflation has increased too. but even then, the amount by which it increases by should be taken with a huge pile of salt. even if you do take a very very reliable bundle as a basis for comparison:

1) there is no guarantee that your bundle reflects the appropriate level of inflation happening, based on cpi values

2) who's to say that you can't take another equally reliable bundle? and what basis is there for comparison with other countries? america's staple might be bread and potatoes, singapore's staple might be rice. do you really think that taking a bundle of bread, rice and potatoes is going to be a solution? there is no solution to this.. and we could easily argue that the bread and potatoes pricing will affect americans a lot more, than singapore.. vice versa for rice.

last of all, inflation should not be seen as a huge evil.

take for example - xiao ming earns $10 per month today. his bundle of rice, flour and eggs costs $8. suddenly his hometown is hit by a plague, in desperation due to short supply of labour, the employers start paying him $50 per month to not run and stay and work and produce goods in their factories. due to shortages his bundle now costs $16. is xiao ming's standard of living, measured at face value, reduced even though there is massive inflation? he can purchase 3 bundles instead of the original single one. so his standard of living, ignoring the plague, could be said to be higher!

there are many other factors than epidemics that can cause such a scenario to happen, or other scenarios where the notion that high inflation is bad for the individual can be easily disproved and debunked.

Definition of Inflation - A rise in the general price level of commodities.
A consumer price index (CPI) is an index number measuring the average price of consumer goods and services purchased by households. (Wikipedia)

You mention: CPI =/= Inflation and the model is silly.

Is there journal or critique that describe CPI as a crappy model? Maybe you would like to point to me so that i can have a read about it. As you know I was not trained in Economics, but would like to find out more.

For you extreme example, When laptop is considered as your basic necessity, I think you will see a deflection. Not a serve one though, because being one component among the many in the basket will not drag down the index by alot. The example you have cited is more about productivity and standard/cost of living.

I think we shall not mixed CPI and cost of living, it will be easier for me to follow the discussion.

For your country to country comparison, I think it is irrelevant in this discussion.

 

[night86mare]

Is there journal or critique that describe CPI as a crappy model? Maybe you would like to point to me so that i can have a read about it. As you know I was not trained in Economics, but would like to find out more.

search cpi overstates inflation, numerous articles, most of them state the cpi overstate inflation by about 0.8 to 1.6 percent regularly

we usually take it as 1.0 overstatement

 

[CYRN]

search cpi overstates inflation, numerous articles, most of them state the cpi overstate inflation by about 0.8 to 1.6 percent regularly

we usually take it as 1.0 overstatement

Do we have Singapore specific references?

:think:

edit..search cpi understates inflation also have results.

 

[night86mare]

Do we have Singapore specific references?

:think:

edit..search cpi understates inflation also have results.

technically thoguh

based on the calculation using base year weights, and assuming that there is constant increment of prices.. logically you can only overstate, not understate.

understatement is done by gdp deflator

 

[raincool2005]

That is why I never believe in financial advisers/consultants/planners/etc..... who recite these AAA blah, blah,..... and then ask you to BELIEVE them and put your entire life savings in their hands so they can "invest" on your behalf....

By the way life insurance companies before the 2000's called their people insurance agents. Now got name game....they call themselves Financial Planner.

Big deal.

Please ask them to explain in great detail derivatives, CDOs...
maybe some never even heard of Paul Volcker and Alan Greenspan.

And some empire idiot claims he is greater than Warren Buffet.

my fren became a insurance agent and had attempted many times to brainwash me to invest in his unit trusts.. i mean he really find the wrong person.. he tried to bullshit with his powerpoint charts and graphs.. don't he knows his fren is a savvy market investor ?

... in the end he finally admit it in an anger when his inner motives got exposed by me, he said all he wants is to make pple invest be it market down or up , he just want the best commissions into his pocket ! :sweat: and he dun really care his clients lived or died, lose money or make money...

 

[Tiger-in-the-woods]

Omg.. BSC valued at $2, imagine at peak last year.. IT WAS VALIED AT ABT$70.. BCS down 88%... crazy

 

[s598719]

Omg.. BSC valued at $2, imagine at peak last year.. IT WAS VALIED AT ABT$70.. BCS down 88%... crazy

Now market people are talking about another US broker that needs bailout, Lehman. This time is not the subprime issue but rather the LBO debt issues. So many private equity funds last year borrowed from all these banks to buy shares of acquired companies at sky high prices. How can these funds possibly pay back all these debts when the stockmarkets have crashed and their shares now worth a lot lower than before.

 

[CYRN]

Now market people are talking about another US broker that needs bailout, Lehman. This time is not the subprime issue but rather the LBO debt issues. So many private equity funds last year borrowed from all these banks to buy shares of acquired companies at sky high prices. How can these funds possibly pay back all these debts when the stockmarkets have crashed and their shares now worth a lot lower than before.

US recession looming. :think: