The Inflation LIE
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2021-07-13 09:20 by Karl Denninger
in Macro Factors , 412 references Ignore this thread
The Inflation LIE
[Comments enabled]

It's time for a bit of 1776, I think -- except there are no more balls in this nation, maffs is racist and "muh weed" is better, right?

 

Note the red.  "Owner's Equivalent Rent" is 23.7% of the inflation index.  Yet the claim is that the price index for an owned house has advanced 2.3% over the last 12 months.

The actual increase in a median home price has increased 13.2% in the last 12 months.

Were that to be the recorded number instead of the abject fraud of OER 12 month reported inflation would be over 10% both in headline and core, since "food and energy exclusions" would make no real difference with nearly one quarter of the total being in residential housing.

This in turn would mean short-term interest rates should be running about 11% right now, with the ten year and mortgages being about 12% with the long bond at about 13-15%.

Yeah.

This is deliberate fraud, it is suborned and ordered by Congress which has done this for the explicit purpose of being able to continue to demand easy money policies from The Fed and spend that which they refuse to tax first and which they then get and causes real poverty in real people.

This is not a minor little detail or something that only hoses a few for the benefit of the many.  It in fact screws nearly everyone and if the American public had not been smoking bong hits in math class for the last 30 years and paid a bit of attention to any of this the entire federal and state government apparatus, along with all the sycophants in the media and "commerce" that feast on you, the people, would have been thrown into shark-infested waters long ago.

But muh legal weed dude, it's all good, maffs is racist and all that matters is the color of your skin -- never mind the intentional fraud and lies you racist pig.

You get -- and deserve -- what you tolerate.

I've been pointing this fraud out for over a decade right here in this column.

Enjoy your own destruction since it is, in fact, exactly what you demand.

Oh, and have another bong hit.

Go to responses (registration required to post)
 

 
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User Info The Inflation LIE in forum [Market-Ticker]
Crossthread
Posts: 9393
Incept: 2007-09-04

Surf City/Sloop point, NC
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They LIE!

T-bone (whole) are up by 2.00 per pound.. 7.00 now..

(forget individual steaks)

Chuck Roast.. 6.00 per pound..

Value pack = lowest grade hamburger meat.. 4.50 per pound..


Jesus even sausage is 2.00 per (package)..

In addition, **RENTALS** are

Un-obtainium!

IF, I mean IF you can find one in THIS Area, (SENC), it's gonna cost you,, 1 bedrooms are approaching 1000.00 +

120K for a "NEW" Mobilehome? WTF!!!!!! 1200sf doublewide?

Forget land/lots, (or renting one).. NONE too be found..

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Quote:
I've no more ****s to Give, because, It was a republic if you could keep it at all, We lost, RIP #Merica

HOLD MY BEER! [beer]
Where's Kyle Rittenhouse when U need Him?
Calrissian
Posts: 29
Incept: 2021-04-12

London, UK
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Maffs is indeed racist, and 2+2 = AMC

May the sheep/serfs get what they deserve.

yours... not transitory
Edwardteach
Posts: 126
Incept: 2021-05-01

Here be dragons
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I ran into a realtor friend of mine in the grocery store and where I live (Vancouver Island) they're getting busy again. But he told me that they're getting bids on some properties that are 150k over asking. That's just insane. Maybe I ought to sell and go someplace else, but where?

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Know what the chain of command is? It's the chain I go get and beat you with until you understand who's in ruttin command here.
Njca
Posts: 115
Incept: 2018-10-16

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Related - the sheeple rejoice when nominal RE and equities returns are growing, but is this just a same priced but smaller box of Frosted Flakes effect.
Calrissian
Posts: 29
Incept: 2021-04-12

London, UK
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re: smaller box of Frosted Flakes effect.
--
... its still better than sawdust and shredded plastic, that you might find in Chinese cereal.
N8thegr8
Posts: 6
Incept: 2021-05-06

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Maybe the rental price hasn't increased proportionally with housing prices because landlords can't charge rent during the Covid emergency?
Tickerguy
Posts: 175429
Incept: 2007-06-26
A True American Patriot!
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No, the rental price hasn't gone up because rates are low and thus cap rates appear attractive (as the landlord is banking on capital appreciation, which is stupid.)

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I don't give a flying **** if you're offended.
Drifter
Posts: 802
Incept: 2016-02-11

Pacific Northwest
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So my **** you money isn't anymore... bastards. ****ing bastards.
Memeticdefense
Posts: 45
Incept: 2018-03-26

Las Vegas, NV
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If OER is 23.7% of the inflation index and shows 2.3% yoy inflation and we replace it with home prices, which increased 13.7% yoy, how does the headline (or core) inflation rate go from 5.4% to over 10%?

The 2.3% inflation rate for OER has a 23.7% weighting, implying that the rest has a 76.3% weighting. Since the overall inflation rate is 5.4%, the inflation rate excluding OER is 6.36%.

23.7% times 2.3% plus 76.3% times 6.36% equals 5.4%.

This means that if we substitute 13.2% for the OER we get:

23.7% times 13.2% plus 76.3% times 6.36% equals 7.98%.

So am I mathematically incompetent or would the headline number be around 8% rather than over 10%?

Tickerguy
Posts: 175429
Incept: 2007-06-26
A True American Patriot!
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It is not just OER; the same distortion also filters into rents.

It does so with rents via a completely different mechanism (cap rates are wildly depressed when the cost of money is zero and especially when prices are rising rapidly); this is sort of a "hedonic substitution" effect but is much more-subtle.

Yes, the actual headline would be 8% if you just fixed the one -- but the problem is if you fixed the one then the rental line would move upward materially, and from there the other two points would come.

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I don't give a flying **** if you're offended.
Cmoledor
Posts: 144
Incept: 2021-04-13

Akron Ohio
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So I guess its a good time to start punching ****ers in the throat???

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The whole world is one big ****ing scam
Why are you giving a vulgarity warning here? Our genial host is an advocate of both skull****ing and sodomy via rusty chainsaw. Credit to Rollformer
Crossthread
Posts: 9393
Incept: 2007-09-04

Surf City/Sloop point, NC
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I'm going to post yet another aspect..

THAT Spartan cabin My Daughter rented for us in Pidgeon Forge? was, (I found out) 385.00 FOR 5 DAYS .. She paid for it.. During July 4th weekend..

NOW that same cabin, is over 1000.00 for 5 days,, IN DECEMBER!


----------
Quote:
I've no more ****s to Give, because, It was a republic if you could keep it at all, We lost, RIP #Merica

HOLD MY BEER! [beer]
Where's Kyle Rittenhouse when U need Him?
Thelazer
Posts: 567
Incept: 2009-05-11

Davenport, Fl
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Just now got an email, can refinance primary and save another 1%.. putting the rate at 2.75% UNFREAKING REAL
Tonythetiger
Posts: 262
Incept: 2019-01-27

Fort Walton
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Did you say "Over"?



smiley Time to break out the pitchforks and torches.


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Those who expect to reap the blessings of freedom, must, like men, undergo the fatigues of supporting it.
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Poer
Posts: 2223
Incept: 2008-09-28

'Eppur si muove!'
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When I said housing was a Ponzi Pyramid sceme This Ticker demonstrates my point.
If interest rates were allowed to go to the real risk rate return..Lets say as KD mentioned 8 percent.
What do you think would happen to your housing investment if you have little equity?

There is likely a meteor in housing future because as Karl said it is about ratios for borrowers being .33 percent payment to income.
Housing can not increase in price without incomes increasing for long without banking shenanigans.
This time when it blows..there will not be a bailout..Not enough money in the world will save housing if interest rates went to 8 percent in my opinion.

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"The degree to which a man substitutes the judgment of others for his own, failing to look at reality directly, is the degree to which his mental processes are alienated from reality." Nathaniel Branden in Ayn Rands 'Capitalism The Unknown Ideal'
Jesjohn94
Posts: 333
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Atlanta
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Our idiot leaders want inflation to erode their massive debts. Lying about the real inflation rate I would think limits GDP growth as so much is driven off those numbers. They know this can't go on forever. There will be some kind of reset. I expect a theft of assets from the middle class. It is easily done if both parties go along with it. The world has already put up with this covid nonsense. A one time 25% tax on retirement and savings to save the world shouldn't be difficult to sell.
Bluto
Posts: 87
Incept: 2021-07-10

Florida
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One of the most insidious parts of inflation is the breakdown of supply chains that results in substituting product B for product A, when product B hasn't been fully tested, nor has a long history behind it.

Consider a mechanical watch with many components. Because inflation broke supplier A, the watch maker secures a replacement from supplier B. 5 years from now, watches start breaking because of a problem with supplier B. Not a big deal for a watch, right. But how about airplanes, bridges, medical devices, etc?

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You must never confuse faith that you will prevail in the end -- which you can never afford to lose -- with the discipline to confront the most brutal facts of your current reality, whatever they might be. VADM James Stockdale
Goldbrick
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Indiana
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When the herd gets culled this next flu season you'll be able to just pick a place and walk right in.

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"Instead of cursing the darkness, light a CONgressman."
Rollformer
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Railroads used to run on watches. Just saying.
Ronniemcghee
Posts: 161
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Miramar Beach
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But my SS COLA is so high! It'll keep me above water! /s

Year COLA
20150.0
20160.3
20172.0
20182.8
20191.6
20201.3

Nah...It'll be fine.
Superdude
Posts: 444
Incept: 2009-06-16

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If you guys want to see what the future looks like for cities in the US, watch videos whats happening in South Africa at this very moment. You will probably not find them on youtube though...
Handyone55
Posts: 286
Incept: 2010-07-06

Ceciltucky, Maryland
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The next year should be a real train wreck for affordable housing. Couple the coming wave of evictions with lots of small landlords selling their units, and rents and security deposits rising to cover the next rent moratorium. Sounds like a perfect storm of homelessness.

Maybe destroying small landlords wasnt such a good idea after all? What do you think, Governor Hogan?
Mannfm11
Posts: 7193
Incept: 2009-02-28

DFW, Tx
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What is it? Oats didn't change in price and we are all horses?

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The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
Quik49
Posts: 10888
Incept: 2007-12-11

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But Powell said this morning its going to moderate...

Kick the can...

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