Monday, September 16, 2013

The Inflationary No-Fly Zone

Click to enlarge.

It's an exponential trend failure two-fer.

No-fly zone

A no-fly zone (or no-flight zone) is a territory or an area over which aircraft are not permitted to fly. Such zones are usually set up in a military context, somewhat like a demilitarized zone in the sky, and usually prohibit military aircraft of a belligerent nation from operating in the region. Aircraft that break the no-fly zone may be shot down, depending on the terms of the NFZ.

No matter how hard we try (and we have made so many attempts), we cannot seem to punch through the record high set in July of 2008. Seriously. So close and yet so far!

I find it very hard to believe that the PPI will permanently hug the border of the no-fly zone. Then again, I could be wrong. Perhaps there is a relationship between hugging and ZIRPing. Japan faced 20+ years of flat consumer inflation. We've seen roughly 2 straight years of flat PPI inflation.

The Fed's ZIRP is the largest monetary operation ever mounted. Quite frankly, this kind of thing's never been attempted before in the United States.

It will be the largest airborne operation ever mounted. Quite frankly, this kind of thing's never been attempted before. We shall seize the bridges. It's all a question of bridges, with thunderclap surprise, and hold them until they can be secured.

The operation will continue until all the bridges can be secured. I have no doubts about that. Sigh.

This is not investment advice.


I wasn't happy with the ending point I chose on the second exponential trend in red. It's been updated to end at the short-term peak set in July of 2011.

Source Data:
St. Louis Fed: Producer Price Index: All Commodities


Stagflationary Mark said...

From the "bridges" link:

We need an unsecured $5million bridge loan urgently to secure a leverage program. we are willing to pay up to 30% in interest per month plus principal at the end of 50 days

Emphasis added.

From the comments of that link:

Give me more details,what is going to secure the loan...

What is this? Some sort of Monty Python Spanish Inquisition?

NOBODY expects the securing of an unsecured bridge loan! Our chief weapon is surprise...surprise and fear...fear and surprise.... Our two weapons are fear and surprise...and ruthless efficiency.... Our *three* weapons are fear, surprise, and ruthless efficiency...and an almost fanatical devotion to the Pope.... Our *four* *Amongst* our weapons.... Amongst our weaponry...are such elements as fear, surprise.... I'll come in again.

Gallows humor.

Anonymous said...

Amazing that it's been horizontal for 2 1/2 years - if there is some sort of upper bound,one would expect some inflationary creep.


Stagflationary Mark said...


One would expect that, this one anyway.

It just keeps bouncing off that arbitrary ceiling though. This is not a prediction that it will continue to do so of course. It might punch through soon, or alternatively it could stop trying (at least in the short-term).

Troy said...

Per DeLong I see CBO has their latest long term projections out.

$4T (real) in added production by 2020.

Working age (22-62) population is only rising 3M (2%) in this time, so this 25% growth has to come from productivity.

Kiss your Saturdays goodbye America!

Troy said...

CBO's projections vs. actual real GDP growth.

Didn't know DC legalized ditch weed, too.

dearieme said...

Stagflationary Mark said...



A Congressional Budget Office *and* Central Bank Optimism? How can we lose!!

Stagflationary Mark said...


For what it is worth, I'm kind of bracing for another deflationary Christmas. 2014? Plus or minus a year?

Wisdom Seeker said...

I found this PPI plot interesting. I went and looked at the whole data series, including the subcomponent series. These PPI measurements have stayed narrow ranges for several years many times since the 1920s. The longest was from the late 1940s to the mid 1960s. Another episode was from roughly 1982-1987. In fact, from a PPI perspective, "the inflation already happened" -- from 2001-2008.

Based on that history, I think we can expect the PPI to flatline for several more years.

Whether the PPI bears any resemblance to actual changes in real-world prices of actual products is a separate issue...

Stagflationary Mark said...

Wisdom Seeker,

In fact, from a PPI perspective, "the inflation already happened" -- from 2001-2008.

That's how I see it too. As I said in my previous comment, I think some of it could be undone during an upcoming Christmas season.

I'm kind of bracing for it. It is not a prediction though. I'm simply saying that it wouldn't surprise me all that much.

Put another way, I'm not a believer in this recovery. I won't argue that the data shows that we're recovering. I'm simply arguing that I do not believe that it is sustainable over the long-term.

Entering the next recession while still in ZIRP should scare the you know what out of all of us. Very few, other than the Japanese of course, think a recession during ZIRP is even possible. That too concerns me greatly.

Should impossible things happen then perhaps even more impossible things could happen. Sigh.