Inflation

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Over the next twelve months I expect

Poll ended at 18 Feb 2017 13:23

Deflation
2
2%
Steady prices (increases of less than 1%)
10
10%
Low inflation (1% to 3%)
64
64%
Medium inflation (3% to 6%)
17
17%
High inflation (more than 6%)
2
2%
Don't know/don't care
5
5%
 
Total votes: 100

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Re: Inflation

Post by Davis »

Flaccidsteele, can I ask why you picked an evil clown image for your picture? I've been wondering that for a while.
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Re: Inflation

Post by Flaccidsteele »

Davis wrote:Flaccidsteele, can I ask why you picked an evil clown image for your picture? I've been wondering that for a while.
It's memorable and draws the attention of many posters
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Re: Inflation

Post by Davis »

That it does!
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Re: Inflation

Post by longinvest »

ghariton wrote:
My preference is for Total CPI, 126.5.
Agree. It's the one that best reflects my spending and standard of living.

If the CPI is higher that 130.3 for as reported in February 2017, for January 2017, I win. If it's lower, you win.
George,

According to Table 326-0020, the CPI (All-Items) for January 2017 was 129.5.

On a related note, beginning in January 2017, the the Bank of Canada’s preferred core inflation measures will be CPI-trim, CPI-median, and CPI-common.

http://www.bankofcanada.ca/core-functio ... inflation/
Measures of Inflation

The Bank of Canada aims to keep inflation at the 2 per cent midpoint of an inflation-control target range of 1 to 3 per cent. The inflation target is expressed as the year-over-year increase in the total consumer price index (CPI). The CPI is the most relevant measure of the cost of living for most Canadians because it is made up of goods and services that Canadians typically buy, such as food, housing, transportation, furniture, clothing, recreation, and other items.

The Bank also monitors a set of “core” inflation measures that allow the Bank to “look through” temporary changes in total CPI and focus on the underlying trend of inflation. In this sense, these core measures of inflation act as an operational guide to help the Bank achieve the total CPI inflation target. Beginning in January 2017, the Bank’s preferred core inflation measures will be CPI-trim, CPI-median, and CPI-common. See Renewal of the Inflation-Control Target: Background Information – October 2016 for more information on these measures.
Here's a handy link to the historical values of the Bank of Canada's measures:
Consumer Price Index

We can see that the Bank's "Total CPI" is what Statistics Canada calls "All-Items CPI".
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Re: Inflation

Post by ghariton »

Yes, you win this round. I will certainly buy you a beer or two if we ever get together physically. In the meantime, enjoy the virtual beer of your choice on me.

The Bank of Canada's replacements for core CPI are certainly interesting. I would expect them to track rather closely most of the time. But I can imagine events leading to differences as well.

Meanwhile, I'll continue to rely on the headline CPI for my planning, etc.

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Re: Inflation

Post by longinvest »

George,
ghariton wrote:Yes, you win this round. I will certainly buy you a beer or two if we ever get together physically. In the meantime, enjoy the virtual beer of your choice on me.
Enjoying my virtual beer: :beer: :D

Yet, you're in a nice situation. Your portfolio has preserved more of its value than if inflation had been higher. I assumed a higher overall risk; I could have lost on both counts (bet and portfolio purchase power), specially with the recent bump in inflation (0.86% just this last month). :wink:
ghariton wrote: Meanwhile, I'll continue to rely on the headline CPI for my planning, etc.
That's what I do, too.
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Re: Inflation

Post by pickmepickme »

George, you can send him a beer via this app. I saw this piece on CTV News the other night.

http://www.ctvnews.ca/video?clipId=1063427
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Re: Inflation

Post by longinvest »

pickmepickme wrote:George, you can send him a beer via this app. I saw this piece on CTV News the other night.

http://www.ctvnews.ca/video?clipId=1063427
Nah! I'd much prefer meeting in person at some point and having an awesome time discussing with George. I'll pay him a beer or two for the pleasure!
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Re: Inflation

Post by ig17 »

How Worrisome is Future Inflation?

To save you a click: not worrisome.
In Summary

Secular macro trends are clear – the risk of high inflation is low. The short-term trends are less clear, however, there does appear to be somewhat limited upside risk at present in future inflation. A rise in the Core CPI to 2.3% would not be surprising and will very likely keep pressure on the Fed to continue raising rates thru 2018. On the other hand, the secular trends remain firmly in place and will likely cap any potential rise in future inflation.
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Re: Inflation

Post by Insomniac »

Thanks.

Interesting comments on commodity price trends and federal debt trends.

I (and many others) have always assumed that increasing federal debt leads to inflation; seems to be a bad assumption.

Low commodity prices means Canada may not be the best place to invest. Probably a good thing that most of my equity investments are foreign.
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Re: Inflation

Post by AltaRed »

I think one thing the article missed was (at least up to the Trump era) was expanding global trade. Migration to lowest cost supply/manufacture didn't get real mention in the article. That might change if trade wars erupt but only until the wingnut has been removed from office.

I think ultimately wage pressure will show up as more undeveloped nations have increasing standard of living and labour costs. Stuff made in Japan then shifted to Korea and then Vietnam and China.

We may see commodity pressures evolve if recycling effort and re-purposing costs don't come down more. There is a finite supply of cheap raw materials.
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Re: Inflation

Post by longinvest »

"The Fed" (US) has nothing to do with Canadian inflation.

The Bank of Canada is responsible of Canada's Monetary Policy, which has the following objective:
The objective of monetary policy is to preserve the value of money by keeping inflation low, stable and predictable. This allows Canadians to make spending and investment decisions with more confidence, encourages longer-term investment in Canada's economy, and contributes to sustained job creation and greater productivity. This in turn leads to improvements in our standard of living.

Canada’s monetary policy framework consists of two key components that work together: the inflation-control target and the flexible exchange rate. This framework helps make monetary policy actions readily understandable, and enables the Bank to demonstrate its accountability to Canadians.
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Re: Inflation

Post by AltaRed »

It does to the extent there are US influences on Canada. As the US goes, so do we to a significant extent with respect to trade, GDP, job growth (or not), price of commodities, etc. Capital flows across borders easily and the fate of the loonie is often tied to capital flows. A low loonie raises the price of almost everything in Canada.
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Re: Inflation

Post by ig17 »

longinvest wrote: 19 Feb 2018 17:50 "The Fed" (US) has nothing to do with Canadian inflation.
I don't know how trustworthy www.inflation.eu is but FWIW... here are the charts of historic inflation. Top chart is Canada (data starts in 1951), bottom chart is the U.S. (data starts in 1957). It appears that they zig and zag in unison.

Image
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Re: Inflation

Post by longinvest »

First, I don't care about historical inflation in eras prior to the adoption of the current monetary policy and the creation of real-return bonds. This means anything before 1991.

Ever since the Bank of Canada has adopted its policy in 1991, it has maintained inflation within range.

https://www.bankofcanada.ca/core-functi ... #inflation
The Inflation-Control Target

At the heart of Canada’s monetary policy framework is the inflation-control target, which is two per cent, the midpoint of a 1 to 3 per cent target range. First introduced in 1991, the target is set jointly by the Bank of Canada and the federal government and reviewed every five years. However, the day-to-day conduct of monetary policy is the responsibility of the Bank’s Governing Council.
https://www.bankofcanada.ca/rates/relat ... alculator/
A "basket" of goods and services
...that cost: $100.00 in 1991
...would cost: $157.78 in 2017

Per cent change: 57.78
Number of Years: 26
Average Annual Rate of Inflation (%) / Decline in the Value of Money: 1.77
CPI for first year: (Dec 1991) 82.9
CPI for second year: (Dec 2017) 130.8
Meanwhile, in the US, from 1991 to 2017, inflation was higher:
https://www.bls.gov/data/inflation_calculator.htm
CPI Inflation Calculator
$100.00
in December 1991
has the same buying power as
$178.77
in December 2017
which represents an annualized 2.26% rate of inflation, 28% higher than Canadian inflation over the same period.
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Re: Inflation

Post by ghariton »

SGS is showing inflation four per cent higher than official reported inflation by their first method, and eight per cent higher than official reported inflation by their second method.

BLS measures nominal GDP every quarter, hence every year. They then subtract inflation to obtain real GDP growth each year. This real GDP growth, as reported, has been on the order of 2 to 3 per cent a year for the U.S.

But if BLS has been understating inflation by between four and eight per cent a year, then real GDP has actually been shrinking all this ttime, by a rate of minus one per cent a year, all the way to minus six per cent a year.

So, if one takes SGS seriously, the U.S. economy has been shrinking for decades. Mo wonder so many Americans are unhappy -- although, miraculously, the unemployment rate is quite low. Still, some argue that the real (or perhaps shadow) unemployment rate is much higher than reported. To be consistent with SGS, the real unemployment rate muist be on the order of 30 to 40 per cent. Gosh, worse than Greece.

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Re: Inflation

Post by randomwalker »

For years I've used what I call "The Kraft Dinner Index." The writer of the following article uses what he calls "The Burrito Index" the idea is the same.

Oh and by the way I hear the Ministry of Plenty says the chocolate ration is to be increased, double plus good. :wink:

http://www.businessinsider.com/if-peopl ... omy-2016-8
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Re: Inflation

Post by longinvest »

Randomwalker,
randomwalker wrote: 21 Feb 2018 05:39 For years I've used what I call "The Kraft Dinner Index." The writer of the following article uses what he calls "The Burrito Index" the idea is the same.

Oh and by the way I hear the Ministry of Plenty says the chocolate ration is to be increased, double plus good. :wink:

http://www.businessinsider.com/if-peopl ... omy-2016-8
According to Charles Hugh Smith (the author of the article), "the grim reality is that real inflation is 7+% per year" (in the US).

What does your "Kraft Dinner Index" tell us about real Canadian inflation?
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Re: Inflation

Post by randomwalker »

longinvest wrote: 21 Feb 2018 07:34 Randomwalker,
randomwalker wrote: 21 Feb 2018 05:39 For years I've used what I call "The Kraft Dinner Index." The writer of the following article uses what he calls "The Burrito Index" the idea is the same.

Oh and by the way I hear the Ministry of Plenty says the chocolate ration is to be increased, double plus good. :wink:

http://www.businessinsider.com/if-peopl ... omy-2016-8
According to Charles Hugh Smith (the author of the article), "the grim reality is that real inflation is 7+% per year" (in the US).

What does your "Kraft Dinner Index" tell us about real Canadian inflation?
Using 1980 as a starting point Kraft Dinner was twenty cents per box. I believe I saw it in passing the other day for $1.47 at a Zehrs (Loblaws) here in southern Ontario. I believe that works out to about 5.5% increase per year.
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Re: Inflation

Post by adrian2 »

randomwalker wrote: 21 Feb 2018 10:10
longinvest wrote: 21 Feb 2018 07:34 Randomwalker,
randomwalker wrote: 21 Feb 2018 05:39 For years I've used what I call "The Kraft Dinner Index." The writer of the following article uses what he calls "The Burrito Index" the idea is the same.

Oh and by the way I hear the Ministry of Plenty says the chocolate ration is to be increased, double plus good. :wink:

http://www.businessinsider.com/if-peopl ... omy-2016-8
According to Charles Hugh Smith (the author of the article), "the grim reality is that real inflation is 7+% per year" (in the US).

What does your "Kraft Dinner Index" tell us about real Canadian inflation?
Using 1980 as a starting point Kraft Dinner was twenty cents per box. I believe I saw it in passing the other day for $1.47 at a Zehrs (Loblaws) here in southern Ontario. I believe that works out to about 5.5% increase per year.
You can get it on sale for as low as 50 cents.
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Re: Inflation

Post by nomad »

randomwalker wrote: 21 Feb 2018 10:10
longinvest wrote: 21 Feb 2018 07:34 Randomwalker,

Using 1980 as a starting point Kraft Dinner was twenty cents per box. I believe I saw it in passing the other day for $1.47 at a Zehrs (Loblaws) here in southern Ontario. I believe that works out to about 5.5% increase per year.
Back in my after school working days (about 1965) KD went 12 for a buck. Still probably costs Kraft pennies per box to make.
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Re: Inflation

Post by longinvest »

adrian2 wrote: 21 Feb 2018 10:28
randomwalker wrote: 21 Feb 2018 10:10
longinvest wrote: 21 Feb 2018 07:34 Randomwalker,



According to Charles Hugh Smith (the author of the article), "the grim reality is that real inflation is 7+% per year" (in the US).

What does your "Kraft Dinner Index" tell us about real Canadian inflation?
Using 1980 as a starting point Kraft Dinner was twenty cents per box. I believe I saw it in passing the other day for $1.47 at a Zehrs (Loblaws) here in southern Ontario. I believe that works out to about 5.5% increase per year.
You can get it on sale for as low as 50 cents.
($0.50 / $0.20)^(1 / (2017 - 1980)) - 1 = 2.5%.

Let's look at the CPI: (130.8 / 46.2) ^(1 / (2017 - 1980)) - 1 = 2.9% (December 1980 to December 2017)

It would seem that CPI overstates the Kraft Dinner Index inflation. :lol:
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Re: Inflation

Post by ghariton »

longinvest wrote: 21 Feb 2018 11:20 It would seem that CPI overstates the Kraft Dinner Index inflation. :lol:
Perhaps they forgot to adjust for quality changes over time :wink:

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Re: Inflation

Post by Insomniac »

I'm sure that they have made the boxes smaller over the years...
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