{"id":53024,"date":"2020-05-06T15:57:20","date_gmt":"2020-05-06T20:57:20","guid":{"rendered":"https:\/\/olduvai.ca\/?p=53024"},"modified":"2020-05-06T15:59:00","modified_gmt":"2020-05-06T20:59:00","slug":"53024","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=53024","title":{"rendered":"The Problem is Not Deflation, It’s Attempts to Prevent It"},"content":{"rendered":"\n

The Problem is Not Deflation, It’s Attempts to Prevent It<\/a><\/h3>\n\n\n\n

Let’s investigate the Fed’s effort to prevent price deflation.<\/p>\n\n\n\n

Here’s a Tweet that caught my eye. <\/p>\n\n\n\n

\n\n\n\n

<\/a>Real Vision\u2714<\/strong>@RealVision<\/a> \u00b7 <\/a><\/p>\n\n\n\n

\u201cWe\u2019re about to have deflation and the market hasn\u2019t figure it out yet\u2026 when it does, the Fed is going to shit itself.\u201d @hendry_hugh<\/a> @raoulGMI<\/a>
https:\/\/rvtv.io\/3aWzxf4 <\/a><\/p>\n\n\n\n

\"Embedded<\/figure>\n\n\n\n

<\/a><\/a>david moravec<\/strong>@davidmooravec<\/a><\/p>\n\n\n\n

Problem with deflation is- Why buy anything if you know it will be cheaper in the future.<\/p>\n\n\n\n

\n\n\n\n

“Problem with deflation is- Why buy anything if you know it will be cheaper in the future.,<\/em>” responded one person. <\/p>\n\n\n\n

Let’s investigate that question starting with a look at the CPI basket.<\/p>\n\n\n\n

CPI Percentage Weights<\/strong><\/p>\n\n\n\n

\"CPI<\/figure>\n\n\n\n

Why Buy Anything <\/strong>Questionnaire<\/strong><\/p>\n\n\n\n

Q: If consumers think the price of food will drop, will they stop eating?
Q: If consumers think the price of natural gas will drop, will they stop heating their homes? 
Q: If consumers think the price of gasoline will drop, will they stop driving?
Q: If consumers think the price of rent will drop, will they hold off renting until that happens?
Q: If consumers think the price of rent will rise, will they rent two apartments to take advantage?
Q: If consumers think the price of taxis will rise, will they take multiple taxi rides on advance?
Q: If people need an operation, will they hold off if they think prices might drop next month?
Q: If people need an operation, will they have two operations if they expect the price will go up?<\/p>\n\n\n\n

All of the above questions represent inelastic items. Those constitute over 80% of the CPI.  Let\u2019s hone in on the elastic portion with additional Q&A.<\/p>\n\n\n\n

Questions for the Fed – Elastic Items<\/strong><\/p>\n\n\n\n

Q: If people think the price of coats will rise will they buy a second coat they do not need?<\/p>\n\n\n\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

The Problem is Not Deflation, It’s Attempts to Prevent It Let’s investigate the Fed’s effort to prevent price deflation. Here’s a Tweet that caught my eye.  Real Vision\u2714@RealVision \u00b7 May 1, 2020 \u201cWe\u2019re about to have deflation and the market hasn\u2019t figure it out yet\u2026 when it does, the Fed is going to shit itself.\u201d @hendry_hugh @raoulGMIhttps:\/\/rvtv.io\/3aWzxf4  […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[172,202,426,14648,3650],"class_list":["post-53024","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cpi","tag-deflation","tag-inflation","tag-michael-shedlock","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=53024"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53024\/revisions"}],"predecessor-version":[{"id":53026,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53024\/revisions\/53026"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=53024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=53024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=53024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}