Compiled by B2BE On December 21, 2011
Sources: Yahoo Finance Historical, Index Mundi Dot Com
| Date | Dow Jones Opening Price | Crude Oil (Price Per Barrel) | Sugar (Cents Per Pound) | Gold (Dollars per Troy Ounce) | Wheat (Dollars per Metric Ton) | Cotton Daily Price |
| Jan-2001 | 10,790.92 | 25.95 | 10.06 | 265.49 | 132.84 | 64.18 |
| Jan-2002 | 10,021.71 | 19.15 | 7.31 | 281.51 | 125.31 | 43.42 |
| Jan-2003 | 8,342.38 | 30.77 | 7.89 | 356.86 | 149.60 | 56.71 |
| Jan-2004 | 10,452.74 | 31.40 | 6.03 | 413.79 | 166.33 | 76.24 |
| Jan-2005 | 10,783.75 | 42.89 | 8.92 | 424.03 | 153.59 | 51.26 |
| Jan-2006 | 10,718.30 | 62.36 | 16.19 | 549.86 | 167.16 | 59.01 |
| Jan-2007 | 12,459.54 | 53.40 | 10.90 | 631.17 | 196.07 | 59.05 |
| Jan-2008 | 13,261.82 | 90.82 | 11.66 | 889.60 | 369.59 | 73.25 |
| Jan-2009 | 8,772.25 | 43.91 | 12.24 | 858.69 | 239.36 | 57.70 |
| Jan-2010 | 10,430.69 | 77.12 | 21.91 | 1,117.96 | 201.51 | 77.40 |
| Jan-2011 | 11,577.43 | 92.66 | 29.74 | 1,356.40 | 326.55 | 178.93 |
| Percent Change | % 7.29 | % 257.07 | % 195.63 | % 410.9 | % 145.82 | % 178.79 |
I would contend that at first blush these numbers look a little cherry picked. For instance Jan. 2, 1996, only 5 years before your start the Dow was at 5177.45 which would mean from that point to your Jan-2011 the increase was more than 100%. What is the economic/statistical justification for starting in 2001? Also why just that basket of goods you selected, the are limited and 2 of them I would contend aren't good measures (sugar and gold). I would say those two are poor measures because gold only impacts prices of consumer goods in a limited capacity and while "sugar" is in lots of goods it is most often high fructose corn syrup, so I would say corn would be a better measure. The other measures are pretty reasonable, but again what was the statistical and economic justification for the basket of goods that are far less comprehensive than the CPI? Sugar by the way would be a good topic for your blog because government intervention in sugar trade artificially maintains absurdly high prices.
ReplyDeletePerhaps your measures have a solid justification just curious what it is?
Hello PA Salty. Thank you for the reply. The data set is technically 11 years but no cherry picking was intended. We chose cotton because it represents base costs for clothing. We chose oil because its used in the production of goods and transportation services. We chose wheat and sugar because they are common food ingredients. Gold price one of the best inflation indicators out there. Why do you feel Gold isnt a good measure of money printing?
ReplyDeleteWe had other commodities in there as well but were limited by the width of the page. The story is similar in most widely used commodities. If you feel we cherry picked the selections, we would invite you to check Index Mundi for historical commodity prices over the last decade to counter this data set here. We just ask that you choose something that is used across the board by most people every day, not something like oranges or bananas for example as they are more volatile and subject to weather conditions.
I agree the 90s was a good period for stocks but the point of the data set is to show that the period where the United States was growing is now over, and no amount of money printing can prevent the consequences of the last 40 years of destructive monetary policy from the Fed. The system has to break down so that it can be replaced otherwise what is happening in Greece will happen here but on a larger more difficult scale. Thank you for reading!
Thanks, I enjoy educated discussions. Your data set is 11 points, but Jan 2001 to Jan 2011 is definitely a 10 year period.
ReplyDeleteAll I really wanted was context around your data set, my concern with cherry picking was more of a concern that you were manipulating data to fit your theory, a good trick that politicians use frequently (e.g. Mitt Romney's claim about the "millionaire tax" affects job creating small businesses so badly, while based in good economic theory, the data is incredibly suspect and misleading, but you can read all that on factcheck.org if that catches your fancy).
The problem with looking at inflation in small bits is that, yes you could say this data shows that the economy is not growing but to then attribute it to bad monetary policy isn't necessarily an easy sell.
I could suggest, and I'm not saying I necessarily feel this way, that your data shows that the conflicts in the Middle East and west/north Africa cause oil prices to rise far faster than would normally have occurred and because of high correlation with nearly all consumer goods it has caused extreme inflationary pressure. Your data set supports my suggestion just as well as yours (gold possibly excluded but I'll follow with gold at the bottom).
I like the goal and suitability of your basket of goods with your context around them. I'm still personally not a big fan of sugar because while sugars are very common in US foods it is not always sugar as in the price item you used, it is often sugars from things like corn. Sugar prices in the US are held artificially high because of the sugar lobby and our government intervening in sugar trade. That is why sugar prices across the globe are so much lower than in the US. None the less, purpose is always key in econometric analyses and your purpose is good.
Gold, I realize people think very highly of as a stable inflation indicator but it is still quite controversial.
The problem with gold is that:
a.) it is a scarce resource so is subject to fluctuations in people's preferences and the supply.
b.) it may show more about consumer feelings than the actual economic state because when consumers feel unsure about the economy gold is in higher demand and therefore has a higher price. But of course the majority of consumers often do not have a good grasp on the real state of an economy (sad but true).
c.) we aren't actually linked to a gold standard anymore and haven't been for a very long time, so technically it has no connection to the money supply.
But yes I understand that a large community of economist feel gold represents inflation well, the problem is I have never heard a convincing argument for why and I've heard it in A LOT of economics courses. If you have one I'd be very interested to hear it.
Thanks again, I very much enjoy the discussion.
PASalty,
ReplyDeleteYou made some really great counters and opposition to my position here. Especially because I had not considered alternate sources of sugars and government manipulation of those markets.
Also, to some extent you are correct the gold market is influenced heavily by sentiment. For example, the week after Aug 5, 2011 when USA credit was downgraded for the first time, gold had a huge rally.
Regardless of sentiment however, gold's moves over the past 10 years have been huge and have hugely outperformed major stock indexes in the same time period. There's either a shortage on the supply side of gold, or an excess of dollars. I would suspect due to the Fed's activity over the same year period (artificially low interst rates encouraging excessive credit), the real cause of the gold price rise in the gold market is currency debasement. Thank you for the thoughtful reply.