Austrian friends -
I'm looking to make a friendly wager with a Fed defender on future inflation. Setting aside whether we'll actually get "hyperinflation" - does anyone have any recommendations on a good proxy measurement of inflation - one that we both could agree on? Obviously CPI is beyond salvage as a reasonable measure. I think a market-driven measure such as the 10 year yield is too subjective - the market gets things wrong all the time. Or is trying measuring price inflation just wrong altogether since it doesn't account for asset bubbles?
Also, I'd welcome any input (concise input - I'm a not a PhD. and can't spend 80 hours researching) on a % threshold and a time horizon (obviously for negotiation purposes, I'll start as low as possible on rate and as long as possible on time without looking like I'm selling out my position). An accompanying chart or two couldn't hurt either.
Thanks!
you are looking for this: http://redcouch.typepad.com/.a/6a00d8341c6ba253ef0120a537ef3e970b-800wi
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
You can not really measure inflation since you can not distuingish a rise in prices because of greater supply of money and a rise in prices because of greater demand of the good in question or all goods for that matter. But for practical purposes look at the price of good in the currency in question.
"the market gets things wrong all the time"
The market never fails or is never wrong.... I think you are looking more for a neoclassical perspective and not an Austrian one...
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Production is 'anarchistic' - Ludwig von Mises
I think you're probably over (or under?) interpreting my meaning. I simply mean that the stock market/bond market is not an accurate gauge of future phenomena in the economy. i.e. Austrians foresaw the housing bubble when "the market" thought it would last forever (at least before "it" decided that it couldn't...).
no sir, Government said that the housing sector would never fail, not the market... Austrians used the market to explain why the housing sector wouldnt last... just because someone misunderstands the market doesnt mean the market is wrong...
The "market" in this case consists of all the people who invested in real estate despite it being a bubble. They were obviously wrong in a sense... the Austrian explanation is simply to say that they were misled as a result of government policy, not to try and twist reality into making the market appear infallible.
On a side note, if you want to read about the housing bubble through the eyes on Austrian Economists, read Meltdown by Tom Woods
"These fixes are based on the false belief that the free-market economy
has failed. But it is not the market that has failed. It is intervention into
the market that has failed." - Ron Paul, on the intro to Meltdown...WHen he says ''these fixes'' he is meaning government intrevention..
"We've been looking in the wrong place. The current crisis was caused
not by the free market but by the government's intervention in the market." -Tom Woods, Meltdown
Why not use gold value? It is not perfect, but it should show the trend.
what do you mean by ''gold value''?
value is always subjective, it differs from person to person..
He means the price of gold.
The man is just trying to calculate inflation, not to have a deep theoretical discussion...
Nico: The "market" in this case consists of all the people who invested in real estate despite it being a bubble. They were obviously wrong in a sense... the Austrian explanation is simply to say that they were misled as a result of government policy, not to try and twist reality into making the market appear infallible.
Nico:He means the price of gold. The man is just trying to calculate inflation, not to have a deep theoretical discussion...
Nico, both your posts here are right on target.
And there is a big difference between saying "there is no such thing as market failure" and saying "people buying stocks always know what they are doing, unless the govt tricks them somehow". The former is right, the latter is dead wrong.
Plenty of people, sometimes enough to affect the price of a stock, are stupid. Plenty of people lose money through their own foolishness in the "holy market". like the vast majority of those who start a business. Plenty of people live beyond their means, get into debt, are victims of fraud, believe every infomercial they see on TV. When AE says the market "never fails", it means [among other things] that the foolish will lose their money. Not that everyone who goes to market is all wise.
Isaac - I'm a staunch Austrian with a heavily Rothbardian tilt. I didn't know there was a secret ancap handshake in order to enter this forum. So, yes - Tom Woods is not new to me. I'll promise to be more judicious with the term "market."
Rico & Dave - exactly.
Dude - Spot price of gold was the only thing I could think of and we have an existing bet on that (payout is difference in spot price between 7/1/10 and 7/1/12). My "friend" wants a secondary bet that's a bit more of a direct proxy of inflation (as he defines it).
Thus - despite the friendly banter here - my question still holds. Does anyone have a suggestion?
Some suggestions:
1. Watch prices at walmart of agreed upon products, and a gas station.
2. Decide on some basket of commodities, and see what happens to it.
3. Combine both of the above.