No inflation? What Really Happened Since 2000
Since the year 2000, we've witnessed a significant change in the value of various assets. I'm not talking about individual stocks, which can always move around, sometimes quite dramatically, even within large bull and bear market trends. I'm talking about some major categories: gasoline, manufacturing, gold, oil, and employment.
This isn't science, but it is interesting. Then again, economics and investing aren't sciences to begin with. But I just wanted to be sure you understand that we're looking at these items because they say something about our world and where it's been heading since the new millenium.
We're using Corning to represent manufacturing. Also, the numbers are approximate, but accurately represent the degree of change. Special thanks to Eric Janszen at itulip.com for this.
2000
Gallon of gas: $1.40
Share of Corning: $110
Gold: $270
Oil: $30
Unemployment: 4%
2013
Gallon of gas: $3.50
Share of Corning: $14
Gold: $1,200
Oil: $95
Unemployment: 7%
An interpretation that bears consideration:
When the tech bubble collapsed in 2000, the Fed and the government decided to reflate the economy and markets. The Fed did so with monetary policy, the government with fiscal policy. As a result of the 2008 collapse, they reflated again. This time it took a lot more fire-power, essentially all they had available to them at the time. I think that's what the numbers above are telling us.
It is reasonable to conclude that these inflating and reflating efforts will continue. Once begun, there's no way to stop that's politically acceptable. They won't allow another severe recession or, worse, a depression.
But ask yourself: How long can they continue to keep things propped up? Forever?
This isn't science, but it is interesting. Then again, economics and investing aren't sciences to begin with. But I just wanted to be sure you understand that we're looking at these items because they say something about our world and where it's been heading since the new millenium.
We're using Corning to represent manufacturing. Also, the numbers are approximate, but accurately represent the degree of change. Special thanks to Eric Janszen at itulip.com for this.
2000
Gallon of gas: $1.40
Share of Corning: $110
Gold: $270
Oil: $30
Unemployment: 4%
2013
Gallon of gas: $3.50
Share of Corning: $14
Gold: $1,200
Oil: $95
Unemployment: 7%
An interpretation that bears consideration:
When the tech bubble collapsed in 2000, the Fed and the government decided to reflate the economy and markets. The Fed did so with monetary policy, the government with fiscal policy. As a result of the 2008 collapse, they reflated again. This time it took a lot more fire-power, essentially all they had available to them at the time. I think that's what the numbers above are telling us.
It is reasonable to conclude that these inflating and reflating efforts will continue. Once begun, there's no way to stop that's politically acceptable. They won't allow another severe recession or, worse, a depression.
But ask yourself: How long can they continue to keep things propped up? Forever?
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