by Mish

Medical care services jumped 0.9%, and shelter jumped 0.3%.

This will not help the economy. And it will subtract from consumer spending other than Obamacare and rent, but economists are cheering.

Real World Happiness

  • Food at home -1.9%
  • Energy -9.2%
  • Gasoline -17.3%
  • Fuel Oil -12.8%
  • Electricity -.07%
  • Used cars -4.0%

Unreal World Happiness

  • Food Away From Home +2.8%
  • Medical Care Commodities +4.5%
  • Shelter +3.4%
  • Transportation Services +3.1%
  • Medical Care Services +5.1%

Keynesian Theory vs. Practice

Keynesian theory says consumers will delay purchases if prices are falling. In practice, all things being equal, it’s precisely the opposite.

If consumers think prices are too high, they will wait for bargains. It happens every year at Christmas and all year long on discretionary items not in immediate need.

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Reality Check Questions

  1. If price of food drops will people stop eating?
  2. If the price of gasoline drops will people stop driving?
  3. If price of airline tickets drop will people stop flying?
  4. If the handle on your frying pan falls off or your blow-dryer breaks, will you delay making another purchase because you can get it cheaper next month?
  5. If computers, printers, TVs, and other electronic devices will be cheaper next year, then cheaper again the following year, will people delay purchasing electronic devices as long as prices decline?
  6. If your coat is worn out, are you inclined to wait another year if there are discounts now, but you expect even bigger discounts a year from now?
  7. Will people delay medical procedures in expectation of falling prices?
  8. If deflation theory is accurate, why are there huge lines at stores when prices drop the most?

Bonus Question

If falling prices stop people from buying things, how are any computers, flat screen TVs, monitors, etc., ever sold, in light of the fact that quality improves and prices decline every year?

Crazy Thinking

Anyone who thinks soaring Obamacare and rent is a good thing and will help the economy is crazy.

By the way, pay particular attention to the price of new and used cars. I expect a price plunge in those categories as people will have less discretionary spending thanks to a rise in Obamacare premiums and rent.

Mini-Stagflation

Won’t that be fun?

By the way, Keynes thought a recession and inflation at the same time could not happen. Somehow Keynesian idiocy managed to survive anyway.

Mike “Mish” Shedlock

Another Surge in CPI Medical Care Costs

The cost of medical care services jumped 0.9% in August and is up 4.3% from a year ago.

Medical Care Costs Soaring Out of Control

The cost of medical care services dramatically outpaces stated CPI inflation measures.

Fed’s Asymmetric Policy: Stagflation Lite Coming Up? Here Already?

Today the BLS reported the CPI for All Items rose 0.4% in October.

CPI Benign but Medical Services and Rent Squeeze Continues

Consumer prices were flat in September and core CPI rose less than expected. Housing and medical services are problems.

Medical Tourism

Why have routine (and not so routine) medical and dental services performed in the US when you can have them done cheaper elsewhere and get a free vacation out of it to boot?

CPI Shows Sharply Rising Medical Costs; Huge Obamacare Hikes Planned

The CPI came in exactly in line with the Bloomberg Consensus option today.

Inflation-Adjusted Spending Declines Most Since September 2009: Stagflation Coming?

Today’s Personal Income and Outlays report shows consumer spending rose less than economists predicted and far less than inflation. The result is a big decline in real spending. Economists surveyed by Econoday missed the mark once again.

Diving Into the Medical CPI: Are Your Medical Expenses Up Only 5% from Year Ago?

On November 1, I posted a couple of charts from Variant Perception that shows medical price inflation plus rent inflation is up nearly 9% from a year ago.

Good News For Treasury Bulls

Money managers pulled $1.2 billion from the iShares 20+ year Treasury Bond ETF last week, the most on record, and the second-largest withdrawal among U.S.-listed exchange-traded funds across asset classes.