You nailed it.
Average household incomes have been soaring and they're are at an all time high --no matter how they're adjusted for inflation. If this is the end of the world we need more of it.
Posted on 11/17/2007 10:16:45 AM PST by shrinkermd
The euro's rise and dollar's slide are squeezing European exporters' profits or multiplying their losses, prompting layoffs and plant closings. Companies are not only curbing production of goods headed to U.S. buyers but also rethinking the way they do business.
The euro recently passed the record $1.47 mark, gaining 11.5% since the beginning of the year against the greenback. It closed Friday at $1.46; a dollar bought 0.68 euro.
Most emblematic of the problem has been the impact of the euro-dollar relationship on the aeronautics industry -- and particularly on France's Airbus, whose main rival is U.S.-based Boeing.
With a falling dollar making Boeing's products cheaper outside the U.S. and Airbus' more expensive, Louis Gallois, chief executive of Airbus' parent EADS, recently described the sinking U.S. currency as a "sword of Damocles" hanging over the company's future. He vowed to cut an additional 1 billion euros in operating costs by 2010 or 2011.
This would mean more layoffs at a company that is already purging 10,000 jobs, a decision made when one euro equaled $1.35.
Survival strategies
Less dramatic but no less crucial is the impact on other European companies that export sophisticated equipment, technology, cosmetics, cars and luxury goods. For firms that make a large portion of their sales in the United States or compete with firms that deal in dollars, survival depends on raising prices, cutting costs or hedging currencies.
The strong British pound, moribund Japanese yen and undervalued Chinese yuan also play roles in this tale of currency chaos, from a European exporter's perspective. Nearly every day, another company announces more lost earnings and job cuts and blames the currency commotion.
(Excerpt) Read more at latimes.com ...
Indisputably. The question is what role will we play in it.
Do you think Treasury debt has no credit risk?
You nailed it.
Average household incomes have been soaring and they're are at an all time high --no matter how they're adjusted for inflation. If this is the end of the world we need more of it.
Ah the old suppressed zero trick, without which the "soaring" income growth would be a pretty flat curve with any growth in the noise and very dependent upon arguments over the actual rate of inflation.
You mean that the treasury will default, or whether there is a real return after inflation. Even the real rate of return claimed by the Fed is only about 2% assuming CPI is the real rate of inflation.
We can adjust using either the CPI or the PCE, but average incomes are soaring and are hitting an all time high (post 303). Sure, we can just say that average incomes are down based on some price that's gone up enough to make things "look" bad, nobody's going to run a business with that kind of thinking.
Then again, they might vote using that thinking though...
Is there a chance you could give an example with numbers or is this just a word thing? This talking about something being "more" than something else has either got to be based on numbers or it's some personal feeling type story.
Yes it is very simple. For instance, using the “CPI” adjusted figures above, average income has grown from about $82,000 to about $87,000 per annum in 7 years. That is a 1% per annum real growth rate, which is hardly “soaring.” BTW that is well below advertised GDP growth rates, but we will leave aside implied mal-distribution of income in the government supplied and adjusted statistics and just address the present question.
I posted a link above http://www.financialsense.com/stormwatch/2005/0624.html#_ftnref3, which is a detailed discussion of how the basket of goods used to calculate the CPI, are adjusted, along with the items in the basket. Since this was a new accounting invention under Clinton, which has just continued, I am not sure why everyone just buys into it unquestioned.
The question is do you believe your own lying eyes or do you believe the BLS’s lying statistics once you understand all of that? What is the real truth? What would the raw uncorrrected data show We don’t actually know, but I don’t think that anyone serious who buys things in the market would suggest the the government is currently overstating the rate of inflation.
For instance let us take the issue of hedonic corrections in cell-phone purchases. Sure there are all these wizz bang improvements in 7 years, but they cost the manufacturer nothing to put in. You cannot even buy an old stripped down phone that doesn’t do very much, if you wanted to. Besides, who actually buys their cell phone, now or in the past? Do you think replacement of roast beef by chicken when the cost of one soars and the other stays stable is a justified substitution to keep prices flat. In fact, given the health implications, we could ajust the price downward for the “hedonic” factor.
In sum, the point is that if inflation is understated by 1% per year then there was no income growth. If inflation is understated by 2-3% per year, an argument made by John Williams at shodowstatistics http://www.shadowstats.com/cgi-bin/sgs/data then there is negative income growth, which matches his calculated negative GDP growth.
Who to believe - it is your choice, but once you understand how the government calculates CPI, I don’t see how you can believe that that is a meaningful number.
A couple of other articles of interest
Shodow statistics discussion of CPI corrections
http://www.shadowstats.com/cgi-bin/sgs/article/id=343
And a detailed discussion of charts and corrections in the economy:
http://www.shadowstats.com/cgi-bin/sgs/article/id=871
Here is another example showing the discrepency between the BEA’s calculation of income growth and the IRS’s http://www.shadowstats.com/cgi-bin/sgs/article/id=344
Really the IRS should have a pretty good idea, but BEA includes the hedonic “increases” in things like “free” checking and “improved” automobile fuels.
INCOME GROWTH 2002/2001
— IRS VERSUS BEA
(Not Adjusted for Inflation)
Income Category IRS GDI
Wages & Salaries -0.4% +6.8%
Interest Income -20.9% -6.4%
Dividend Income -14.9% +5.1%
You were sort of saying that you saw something that should be added differently. Sometimes in business we get to a point where words don't cut it and only hard numbers work. Your showing what you mean with numbers would be a big help.
We can adjust using either the CPI or the PCE, but average incomes are soaring and are hitting an all time high (post 303). Sure, we can just say that average incomes are down based on some price that's gone up enough to make things "look" bad, nobody's going to run a business with that kind of thinking.
Then again, they might vote using that thinking though...
I said credit risk, not inflation risk.
This is not "soaring" personal income. It would not pay for 10% - 20% year over year gains in real estate and the imputed increased mortgage interest to buy such a rapidly escalating property.
Now, if you don't actually believe the hedonic corrections, geometric weighting and substitutions that go into CPI, then the actual rate of inflation could be significantly higher, wiping out the lofty 1% year over year average income increases altogether, and might make them negative, which would account for why consumers and the middle class are both whining and finding themselves further and further in debt.
I don't know. I have always presumed that the government would produce/print/create the money to pay its bonds, however inflationary the result. Inflation and debasement rather than outright default is the usual risk for sovereign debt.
Your post 286 hinted you'd prefer the PCE, and now you're using the CPI's one percent instead of the PCE's one and a half percent growth, while suggesting the CPI is still not good enough. Talking inflation is useful only if we pick something --some organized methodology. If we don't then we're just strutting and waving our arms.
Soaring means "fly upward", or "glide"; maybe "soaring" with price movements includes a 'dramatic' aspect, Most people getting a 25% raise every seven years will say that their income is soaring. If you tell them that it's only a percent above inflation they'll tell you to kiss off.
Back in post 259, dollarbull worried that incomes were not keeping up inflation. Honesty requires celebrating the fact that incomes are growing faster than inflation.
If a percent annual growth is "soaring" when it's population growth or global warming, then the word describes the fact that our real incomes are one and a half times what our parents enjoyed.
Dead wrong. My reasons believing both government produced statistics as being sharply biased towards understating the rate of inflation I thought were pretty clear.
Let us take you next graph: ($88,000-$63,000)/37=.6% per annum growth in personal income using government produced statistics. That is really meagre. Again, if inflation is understated by even 1% per year, that means that there has been no real growth in average personal income during the working lifetime of almost everyone alive in the US today.
But, bottom line, even if you do believe the government numbers, it is no wonder the so-called middle class is getting pretty edgy.
These are your numbers supposed to bolster your point, not mine.
Ah, my bad. So what we got is that there is no existing method of calculating inflation that you're willing to accept. That's pretty much how most freepers run with it, that way they can say it's anything they want it. Works great for politics but useless for financial work.
I think you meant 0.9%.
25/37 = 0.67567567567567567567567567567568 rounded.
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