Monday, April 30, 2012


A reader sent me the following link and I just have to share it.

April 30, 2012
The Inflation Threat Is a Bogeyman

The conspiracy theory that inflation is being wildly under-reported doesn't withstand more than 30 seconds of scrutiny. So why the persistent belief that we're reliving the stagflationary nightmare of the 1970s when the deflationary nightmare of the 1930s is much more relevant?

I have stagflationary in my name and even I don't see stagflation. Of all people, you'd think I would be the most sympathetic to the conspiracy theory. I do see pathetic real growth, pathetic real yields, and pathetic job creation but I don't see runaway inflation. I track every penny I spend. It's just not there.

As a keeper of receipts, I offer this anecdotal data point.

I refer you to the sticker that was mounted to my Camry 4-Door XLE Sedan V6. In order to compare apples to apples I will remove all of the optional equipment.

Here's the 1996 model.

Camry 4-Door XLE Sedan 3.0 Liter V6, MSRP: $25,038.00

Here's the 2012 model.

2012 Camry

Camry 4-Door XLE Sedan 3.5-Liter V6, MSRP: $29,845.00

Let's ignore quality improvements (note the larger engine on the new model) for a moment and just talk about the 19.2% price increase spread out over 16 full years.

That's an average price increase of 1.1% per year on a large purchase that most Americans very much seem to cherish.

Now let's talk about what the price would be if inflation had really been 10% per year.

$25,038 x 1.1^16 = $115,048

So here's my question for the CPI conspiracy theorists.

How many Camrys would Toyota sell this year in America if they raised the price to $115,048?

Now let's see what the government says new car prices have done.

In April 1996 (the month I bought my car), the new car index was 140.8. As of March 2012, it stands at 143.702. That's an average annual increase of 0.1% per year. At best, the government is under-reporting new car inflation by 1% (the difference between the 1.1% I see and the 0.1% the government sees). That hardly gets you to 10% inflation though.

Would anyone really dispute that new cars of today haven't gotten better by the 1% per year the government seems to be claiming? Seriously?

Let's go back to that engine discrepancy. My car has a 3.0 liter V6 185 horsepower engine. The new car has a 3.5 liter V6 268 horsepower engine. For those keeping track at home, that's a 45% increase in horsepower. Amazing. The government claims that I should have to pay more for a more powerful engine. Why would I disagree? I paid extra to get the V6. It was worth it to me. That's just for starters. I don't think it is hard to imagine other improvements that have been made in the last 16 years.

2012 Toyota Camry Performance

"The four is strong in this car, so there's no reason for the V-6 take-rate to go up." -- Motor Trend

The 2012 XLE V4 has 178 horsepower, which is just 7 horsepower shy of my 1996 XLE V6. It gets 25% better gas mileage in the city than mine too. Further, its MSRP ($24,725) is lower than what I paid 16 years ago. So you tell me where the inflation is in new car prices and we'll both know.

It isn't inflation if you get a 20% better car for 20% more money. In fact, we do that every time we purchase a car. "I like this one but that one is 20% better. Should I pay 20% more for it?" It's not always an easy decision.

It stinks if you cannot afford the new car with added features and improvements, but that's not an inflation problem. That's a wage problem. Let's stick to what the problem really is. For a variety of reasons, wages are stagnating.

It's not stagflation. It's stagployment.

In my opinion, we're going to be stuck with it for a very, very long time. Sigh.


Anonymous said...

Three years ago I paid $3.68 for a jar of peanut butter. I remember the price because I thought that was getting expensive.

Two weeks ago I paid $6.29 for that same jar of peanut gutter.

Stagflationary Mark said...

Peanut butter has been an issue. I'll give you that! I too have noticed that. Fortunately, peanut butter is a tiny portion of my budget.

The government claims that "Other fats and oils including peanut butter" prices have gone up 7.4% per year for the past 5 years. Ouch.

"Oils" in general are getting a bit painful. No doubt about it.

Stagflationary Mark said...

I'd also point out that the plan of raising food and energy prices to offset falling home prices seems a bit dubious to me.

And we wonder why the economy is sluggish?

Stagflationary Mark said...

And then there is soda.

In 2004, I thought I was getting a good deal buying 5 12-packs of Coca Cola for 410. That was $2 per 12-pack.

Those days are over. Now I feel lucky if I can find a 12-pack for $2.80.

Soda prices are definitely creeping up more than inflation overall.

Stagflationary Mark said...

That's 5 12-packs for $10. Typo.

AllanF said...

Inflation in the things you need... fats & oils, (ie. energy), cotton, wood pulp.

Deflation in the things you want... housing, wages, pensions, computer games.

I'd gladly stop my carping in exchange for a perp-walk or twelve. The absolute closest we've come is the SEC's wrist-slap of the Tan Man. That's all we've gotten? WTF.

Stagflationary Mark said...


Yeah, sad that the current inflation/deflation environment creates pain for those with the most needs (the poor) and pleasure for those with the most wants (the rich).

The Tan Man!

Just when you think you've buried that thought deep inside your mind (like the victim of a horrible tragedy and/or great injustice might), someone has to go and bring that up, lol. Sigh.

Oh, well. This is an illusion of prosperity blog. It's only fitting.

mab said...


From your link:

Ben Bernanke and other central bankers have thankfully managed to prevent outright deflation this time around, but high inflation is still our economic Godot.

Prevented deflation, huh? Try telling that to the 10 million under-water home-owers.

Bernanke is a sponsor of fraud. He fully understood which group would come out on top in a fiat based free-for-all market.

And don't get me started on the meme of falling home ownership rates. Every home is "owned" by someone and always has been. "Thanks" to Bernanke, the "right" people now own more property. And "thanks" to Bernanke, they acquired the property without producing anything but fraud.

mab said...

I'd also point out that the plan of raising food and energy prices to offset falling home prices seems a bit dubious to me.


Dubious? No way. It's part of a devious plan that's hidden in plain sight thanks to a massive propaganda campaign. Seriously, how can anyone believe Bernanke et al are that stupid? As AlanF asks, where are the criminal indictments?

Americans are so thoroughly brainwashed it's unbelievable.

Stagflationary Mark said...



3. Of questionable character: dubious profits.

It's deviously dubious!

Troy said...

Prevented deflation, huh? Try telling that to the 10 million under-water home-owers. compares the drop in YOY lending to the drop in home prices.

The Bernanke did manage to arrest the drop in home prices.

Your thesis is apparently failing to understand what would happen to the US economy if things were to be laissez faired and defaults allowed to occur naturally. is the total private systemic leverage (total debt less federal debt / GDP).

We've still got the rest of the decade of current trends before we deleverage back to the pre-dotcom madness.

1995 to 2005 was a sequence of borrowing bubbles -- first the financial sector leveraged up, then the dotcom & corporate sector leveraged up, and then 2003-2006 households kept the game going with their $5T debt bubble (and 2007-now has been the Feds taking on debt to keep the balls in the air). is the YOY growth of debt for these 4 sectors.

One can see how fed debt (green) was used to lessen the shock to corporate debt (red) and household mortgage debt (blue).

It's all really quite sickening, yes, but our situation is a lot more complicated, and parlous, than just the Fed arresting our eventual collapse.

Households still owe $13T:, any actual collapse from here will wipe out millions of people's savings, since, contrary to popular belief, banks don't actually lend out money from nothing.

Americans are so thoroughly brainwashed it's unbelievable.

I didn't know anything 10 years ago. My main source of education has been making FRED charts, LOL.

How many Americans have seen that CMDEBT chart? It's not a narrative the media wants to give people, since pain and intellectual discomfort doesn't attract eyeballs and advertising.

Americans were made to buy into globalism in the 1990s and the results have been, charitably, a mixed bag for most people. The media itself benefits from globalism in a cheaper standard of living, and, thus far, minimal los s of employment (Chinese can't write English that well and the Indians as a rule have their issues too).

In the 2000s we were sold on two BS wars, tax cuts, and doubling down on our massive trade deficits with China, Mexico, and oil exporters.

We papered over these massive economic mistakes with the housing bubble:, a stealth stimulus of over $1T/yr that ran for the middle of the decade, 2003-2006.

Thus far the system has yet to face the music for all this disastrous economic policy. Who wants to see tax levels double across the board? That's no fun.

Instead, we pretend.

Stagflationary Mark said...


Instead, we pretend.

The trend is to pretend, overspend, and lend to the end!