US Politics: Mark your calendars

[Shryke]

Isn't it something like food and oil prices are so volatile that it's too much like hard work to factor them into [edit] annual inflation calculations?

I'm OK with excluding them from official inflation as long as you create a separate index to give people an indication of food and fuel inflation over a longer term than simply annual change. Don't some countries have a food price index?

Yeah, it's excluded from core inflation which exists specifically to remove volatile prices.

Shadowstats is a site full of crazy.

[Shryke]

And this is the explanation for the decreased number of manufacturing jobs in America? Or are the reduced wages the "back-breaking" part? When you said manufacturing sector, I assumed you meant the industry, not the average wages of the labor force.

We were talking about unions and labour, so that's what I was specifically referring to.

As a larger picture, it's likely true that globalization and automation may have eaten the US manufacturing sector's lunch no matter what, although there's alot more at work here since the movement of manufacturing southward killed labour as a political movement in the US as well, which has far more wide ranging effects. In general, the whole movement represents a transfer of wealth from labour to capital.

Their might also be effects from the movement of manufacturing tearing up alot of the base the US had for manufacturing. China is attractive in part because they can do everything for you. The same way Ford wanted the autobailout because they depend on other industries that depend on selling to all 3 american auto-makers.

But just in general, intra-national fighting between states has been bad for the US. It's often a literal race to the bottom.

[Fragile Bird]

The

Yeah, it's excluded from core inflation which exists specifically to remove volatile prices.

Shadowstats is a site full of crazy.

Shadowstats may be a site full of crazy, but many critics of the way CPI is calculated agree with their analysis of the real rate of inflation. The problem I have with eliminating energy and food from "core" inflation is that seems to make the use of the word "core" nonsense. Being able to eat and heat your house and drive seem pretty core.

[The Anti-Targ]

Here is a link to the Atlantic article I was talking about earlier in this thread on that subject: http://www.theatlant...ng-boom/309166/

The author predicts an increased trend in "insourcing," i.e. U.S. companies bringing manufacturing jobs back to the United States. The general reasons are:

But there are other reasons, too, like recalibration of costs and competitive advantage (the article gives the example of a dishwasher that beat the "China price" because the whole process was made more efficient where design and manufacturing could work together), the other is the shortening of the manufacturing lifecycle.

What I got from reading the article is the extent to which we've discounted the "brains" needed in manufacturing and lost our advantage as a result.

I can't really comment on some of the rationalisations for insourcing (wasn't that from a movie?), but I think the shipping cost one is dubious. We're at the arse end of the world and yet we can still ship our butter and lamb to Europe and be competitive on price. Indeed our butter in Europe (UK) was cheaper to buy there than here for a little while. Container shipping is still an incredibly cheap way to move goods around the world on a per unit basis. And $2 per day --> $10 per day per labour unit vs. $13 per hour is still a massive advantage compared to trippling the fuel cost.

Wage growth in China wouldn't be a reason to re-patriate jobs, it would be a reason to start bulding factories in Bangladesh.

Better productivity sure, that would be a reason if it outweighs the labour unit costs. And energy cost of production (as opposed to transport) can also be a factor.

At this point I see it as PR. Once the jobs start flooding back to the USA then you can call it economically driven.

[Shryke]

The

Shadowstats may be a site full of crazy, but many critics of the way CPI is calculated agree with their analysis of the real rate of inflation. The problem I have with eliminating energy and food from "core" inflation is that seems to make the use of the word "core" nonsense. Being able to eat and heat your house and drive seem pretty core.

That is, frankly, bullshit. You are making a silly argument based around a different interpretation of the word "core" and ignoring what's actually trying to be measured here.

Remember, there is no "true" inflation. There is only an index economists make up to try and track some sort of movement in the economy. The purpose of core inflation is to make it easier to highlight long-term trends by removing volatile products from the measurement.

As a simple example, gas prices spiking right before a long weekend does not represent a fundamental shift in the price of gas.

[Shryke]

Here is a link to the Atlantic article I was talking about earlier in this thread on that subject: http://www.theatlant...ng-boom/309166/

The author predicts an increased trend in "insourcing," i.e. U.S. companies bringing manufacturing jobs back to the United States. The general reasons are:

But there are other reasons, too, like recalibration of costs and competitive advantage (the article gives the example of a dishwasher that beat the "China price" because the whole process was made more efficient where design and manufacturing could work together), the other is the shortening of the manufacturing lifecycle.

What I got from reading the article is the extent to which we've discounted the "brains" needed in manufacturing and lost our advantage as a result.

It's a pretty good article and does seem to want to highlight what you are talking about (ie - the shortening of the product cycle and the like, which is quite interesting)

At the same time, I'm not quite buying his point form bit there. Especially since he never mentions US wages. Because, from stuff I've read before, the wages of the jobs coming back are lower. The US has insourced lower wage jobs. Basically, Chinese jobs went up, US jobs went down and manufacturing is meeting in the middle. This trend may or may not be part of the example he's looking at though, I'm not sure.

The other thing he's pointing out here, although only obliquely it seems to me, is the issue of unions lowered power here. Which may be tied up in lower wages and benefits I mention above. The article implies "it's totally ok though, cause management is being nicer now"

It also, he implies and I'd believe, rooted in the labour rolling over to management demands and this making the whole enterprise more stable. His talk of "Strike City" is a big deal though and, as I understand it, another big reason Germany does so well on manufacturing. Their labour/management relations are much less nasty and much more stable with contracts, so they can guarantee a much more stable production capacity then the US ever could, which is a big plus to buyers.

The two points sort of tie together in some ways.

The shipping cost is generally so minimal I don't know if I buy his argument about gas costs. It's usually dirt cheap to ship stuff across the ocean. It's actually moving it from coast to inland where the cost is. That's afaik anyway.

But now I'm just rambling. A good and interesting article.

[Fragile Bird]

Shryke, the purpose of measuring inflation is to determine how prices are increasing, or how the value of money is decreasing, not to track some sort of movement in the economy. The index of leading economic indicators, the index of producer prices, the index of industrial production all measure movement in the economy. Core inflation is used to determine what economists call "inflation inertia", which is why oil and food are taken out. CPI, which uses oil and food prices, is the rate used to make adjustments to things like pensions and wages. 'Core inflation' was created as a method to determine future inflation, and because the basket items used to calculate core inflation are also now acting erratically, economists are yet again looking to different measures, like 'the trimmed mean', and 'median inflation'.

So now rather than reporting CPI, a measure which tells the public what affects them in the pocket book, core inflation has been trotted out to the public as the number to pay attention to. We've just had a thread discussing the fact that most people don't understand the meaning of the graduated income tax system. Try and tell me the public understands the role of core inflation in measuring inflation inertia. The whole invention of core inflation, no matter how useful to economists, does fuck all to inform the public about the rate of inflation and the rate at which their money is losing value. And the name 'core' is part of that. It may be a 'silly argument' to say oil and food prices should be included in core inflation; rather, it's CPI that should be reported as it used to be, and 'core inflation' should be renamed the 'inlation inertia measure' or something like that.

Yes, it's a semantic game, but so is your saying there is "no true inflation". Of course there is, Inflation exists - prices go up, the value of money goes down, and countries try and track the speed at which it's moving as best as they can. (And those measures, of course, would track deflation too). But you're kidding yourself if you don't think governments have switched to reporting core inflation for the purpose of confusing and calming the public. Oil prices spiking on a weekend and the fact that food prices rise and fall with the seasons and with droughts and floods are a fact of life that we all face and are far more important to the public, IMO, than core inflation.

[ThinkerX]

]Isn't it something like food and oil prices are so volatile that it's too much like hard work to factor them into [edit] annual inflation calculations?

Thats the dishonest weasel wording kicking in.

Yeah, it's excluded from core inflation which exists specifically to remove volatile prices.

And the other items measured are NOT volatile?

Shadowstats is a site full of crazy.

I did not bring up Shadowstats - and have not been there in probably a couple years.

However, volatile or not, energy (oil) and food are a VERY big chunk of economic activity. To actively dismiss them from measurement because including them makes things look bad is WRONG. It means that the inflation measurement is AUTOMATICALLY badly flawed, and predictions based on it will be flawed as well.

[BLU-RAY]

Assuming that's not rhetorical (I didn't read Thinker's post super-closely), volatility generally implies high-variance up-and-down, and wages are sticky upwards. How often would you assess oil and food and make wage adjustments?

[ThinkerX]

How come employers don't pay their people more when oil and food prices go up?

Because the employers that matter - the so called 'One Percent' - are greedy SOB's attempting to instute what amounts to modern day serfdom. Applies to 'left' and 'right' both.

Assuming that's not rhetorical (I didn't read Thinker's post super-closely), volatility generally implies high-variance up-and-down, and wages are sticky upwards. How often would you assess oil and food and make wage adjustments?

Big misconception here: Real Wages, even using the official inflation figures, are not 'sticky upwards' as compared to the past.

Used to be, a guy with a blue collar job could afford a decent house and vehicle WITHOUT the spouse needing to work. They could even manage a one or two week vacation now and again without blowing up the pocketbook. This situation was the NORM - not the exception.

Mosty, this was BEFORE the changes to the way inflation is measured.

That whole situation is going fast these days. Nowdays, a blue collar guy in that same job CANNOT manage that anymore - spouse pretty much has to work.and even then things are collectively a lot tighter. And meanwhile, talking heads spout lies based on false numbers to justify this shift - among other things.

[Shryke]

Downward Nominal Wage Rigidity is what you are thinking of. Basically, you can't make the actual amount of dollars people make go down very easily. Pay cuts are hard.

Inflating real wages down, however, is not hard at all. It's one of the reasons we like a low but steady rate of inflation. It makes adjusting wages easier.

However, volatile or not, energy (oil) and food are a VERY big chunk of economic activity. To actively dismiss them from measurement because including them makes things look bad is WRONG. It means that the inflation measurement is AUTOMATICALLY badly flawed, and predictions based on it will be flawed as well.

They don't make it look worse, they introduce larger short-term variance into the numbers.

The idea that this removes their effect on the inflation measurement all together is both ridiculous and unsupported by the facts. Core Inflation and Inflation don't diverge over the long term.

[Shryke]

It actually wasn't rhetorical. I'm also confused about who my wages would ever actually be raised due to inflation. Is some office at my employer tracking CPI? Am I supposed to track it myself and demand a raise if it moves by a certain %?

I'm woefully uninformed on this issue.

Cost of living adjustments or the like usually.

If you are working in the US, you may be unfamiliar with these since many have forgone them for a few years now since it's a quick, easy and invisible way to cut people's wages during a recession.

[Shryke]

Shryke, the purpose of measuring inflation is to determine how prices are increasing, or how the value of money is decreasing, not to track some sort of movement in the economy.

The rise of prices would be that movement in the economy.

It is, however, just an attempt to measure it. Just like unemployment is real, but can't be measured directly and changes based on what you think unemployed even means. Inflation is "the rise in the price of goods over time" but what goods? And what factors are effecting those and are they important.

And that's the heart of core inflation.

Yes, it's a semantic game, but so is your saying there is "no true inflation".

No, I'm saying there is no true measure of inflation. There is only whatever index we decide to use.

You are playing a silly semantic game complaining about the name of the damn index.

Core inflation is used to determine what economists call "inflation inertia", which is why oil and food are taken out. CPI, which uses oil and food prices, is the rate used to make adjustments to things like pensions and wages. 'Core inflation' was created as a method to determine future inflation, and because the basket items used to calculate core inflation are also now acting erratically, economists are yet again looking to different measures, like 'the trimmed mean', and 'median inflation'.

So now rather than reporting CPI, a measure which tells the public what affects them in the pocket book, core inflation has been trotted out to the public as the number to pay attention to. We've just had a thread discussing the fact that most people don't understand the meaning of the graduated income tax system. Try and tell me the public understands the role of core inflation in measuring inflation inertia. The whole invention of core inflation, no matter how useful to economists, does fuck all to inform the public about the rate of inflation and the rate at which their money is losing value. And the name 'core' is part of that. It may be a 'silly argument' to say oil and food prices should be included in core inflation; rather, it's CPI that should be reported as it used to be, and 'core inflation' should be renamed the 'inlation inertia measure' or something like that.

Of course there is, Inflation exists - prices go up, the value of money goes down, and countries try and track the speed at which it's moving as best as they can. (And those measures, of course, would track deflation too). But you're kidding yourself if you don't think governments have switched to reporting core inflation for the purpose of confusing and calming the public. Oil prices spiking on a weekend and the fact that food prices rise and fall with the seasons and with droughts and floods are a fact of life that we all face and are far more important to the public, IMO, than core inflation.

Why is headline inflation more useful? Headline inflation is all over the place. Does the public really think of their purchasing power eroding every long weekend? Is that relevant to them?

You might have a point if core and headline inflation diverged, but they don't over any reasonable amount of time.

[Guest Raidne]

It bothers me that the American Labor movement isn't more supportive of them. After all what's more equitable than everyone, management and labor sharing equally in the risk and rewards of the given enterprise?

Oooh! Ooh! I know the answer to this one! Would it be because employee-owned businesses have no management/labor conflict, and, therefore, no need for union representation? There's no advantage for the union in reducing management/labor conflict.

On Datepalm's point, I can certainly see the argument that incorporation is nothing so much as a system where shareholders are legally authorized to steal the value of the worker's labor. OTOH, it's pretty hard to find investment capitol otherwise, and, hell, if we could get back to the point in the states where this is even a valid description of the problem (i.e. where capitol is largely an investment in labor-driven enterprises), it would be a solution.

[Ser Scot A Ellison]

Shryke,

You must love Wittgenstein.

;)

[The Anti-Targ]

Oooh! Ooh! I know the answer to this one! Would it be because employee-owned businesses have no management/labor conflict, and, therefore, no need for union representation? There's no advantage for the union in reducing management/labor conflict.

Sure, and doctors want people to get sick on a regular basis otherwise they're out of a job. Same with big pharmaceutical companies.

Unions shouldn't be necessary, but they are because of the attitude of capital towards labour. First there were the factory and mine owners, then there was oppressive, dangerous and poorly paid working conditions, then there were labour unions. Capital only has itself to blame for the existence of labour unions.

Large numbers of labour unions, doctors, lawyers and pharmaceutical companies are all symptoms of a deeply deranged society. In a healthy society these things would all be very diminished in number/size/importance/influence.

[Ser Scot A Ellison]

AT,

That's an interesting point but leaves completely inaddressed why the Amercian Labor

Movement is distrustful of employee owned businesses. Care to address that point?

[The Iceman of the North]

A couple of questions Scot. Is there one labour movement in the US, and do you have any links demonstrating their distrust of employee owned businesses?

[Ser Scot A Ellison]

Iceman,

Here's one about United Airlines experience with employee ownership and labor:

http://www.nytimes.com/1997/01/17/business/labor-rifts-return-to-employee-owned-united-airlines.html?pagewanted=all&src=pm

Here's another from the Chicago Tribune:

http://articles.chicagotribune.com/2007-04-01/business/0704010047_1_esop-broad-and-burkle-tribune-co/2

I heard a story NPR several years ago touting an employee owned business that mentioned US labor's distrust of EOBs. I'm looking for it.

I can't find it.

Here's one final article about trust problems between Unions and EOBs:

http://dept.kent.edu/oeoc/publicationsresearch/Win1998-9/AVisitWin1998-9.html

[The Iceman of the North]

So according to your interpretation, the fact that unions wants its members in a company that happens to have some level of employee ownership have a salary level similar to competing companies, is an indication that labour unions are distrustful of employee ownership?