...and he got the Nobel Prize in Economics?

Nobel economist Paul Krugman gets trolled for saying inflation is over if you just exclude most of what people buy


the price of “basics” with the exception of home prices has dropped where I live. Gasoline is down about 10% over the past 3 weeks.



…and so?

I take a sniff of the hot mess, call “tar baby”,

and then just keep walkin’ right along, but shouting out a “Howdy, and Good Day to You!” to Divitas, cuz as my granny said “manners is manners”.

david fb


Ahem. Food and energy are always special characters. Too volatile. Can be left out here too. I think they usually use the term “core inflation.”

"Used cars? They’re considered “basics” now? How many does the average person buy each week?

I’ll concede housing since I don’t usually get involved with it but isn’t that considered a lagging indicator anyway? Not sure. He could still be right


Food and energy have always been excluded from standard inflation measures (as used by the Fed) because of the volatility.

Housing is, at best, a terribly lagging indicator. Rents are usually a 12 month contract, sometimes more. “Imputed rents” for people with mortgages are guesstimates at best.

And “used cars” are purchased, what, once every 5 years? Who would use that in a calculation of what people are paying for their “every day” costs?


If you financed the purchase, you’d feel the cost every day… What percentage of used cars are financed?

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There are contracts signed every month with comparables in the marketplace.

Guys this you only buy a used car every few years has nothing to do with dealer sales. In other words there are weekly numbers.

So the figures (standard inflation measures) are somewhat meaningless?


No, they’re just not helpful when determining inflation trends, which is what the Fed cares about. If gas prices spike because of a short-term oil blockade or collapse because of a sudden glut, that’s not meaningful to their deliberations. If the prices stay elevated that is, because those costs will work their way through the production and distribution chain - where they will show up in Fed statistics and be relevant for making policy.

True, but the Fed surveys are “what are you paying in rent this month”, not “how much more do you think you would be paying if you moved.” The Fed survey captures actual rental payments, and does not ask participants to guess what comparable might be.

Do you mean that used car financing is variable? FWIW, and I have no explanation for it, in previous years used car financing was used in about half of purchases. During the pandemic it fell to about 1/3.

Share of used cars with financing in the U.S. | Statista.

Still, not a terribly meaningful measure of long term inflation - the pandemic increase (which has now reversed) was caused by a shortfall in new car production (chip shortage) which drove demand to used cars. Again, a supply chain issue, not an underlying inflation issue, and one which the Fed said it was ignoring as a temporary phenomenon.


No, I mean that the monthly payment on a more expensive car will be higher than on a less expensive car. I agree that it tells us nothing about the trend in used car pricing, but it has everything to do with one’s “every day” cost of living.

Inflation trend is pretty meaningless when you exclude most of the items that people buy.

Ah you are assuming the FED does not do simple math.

Got you.

No, I am trying to explain why the Fed’s rent data is a lagging indicator, and why they don’t give it as much weight as you might think. Barron’s tries too, not that it will do any good.

Think of it this way: When rent costs first started to soar during the pandemic, only the households signing new leases had to pay higher costs, because all others were locked into long-term contracts that kept their rent steady for the duration of their lease. So while the cost of new leases was rising, the average—as measured in the CPI—didn’t catch up until several months passed in which more renters were signing new, more expensive leases.

“The folks who were looking for new leases had to deal with these really high prices, but the folks who were still in their houses didn’t,” says Judd Cramer, a lecturer in economics at Harvard University. But as time goes on, “all of us have to renew our leases, or sign new leases. So eventually, we all get to that higher rate.”

Now, the same thing is happening in reverse. Those new leases are holding steady or, in some cases, even falling in price; renters who signed new leases in September saw their costs drop 0.2%, according to Apartment List data. But because CPI looks at the average across all renters, economists estimate it could take another three or so quarters, or close to a year, before deceleration or even deflation in new leases will show up in the government’s data. The CPI from September showed the cost of rent rising 0.8%.


Again that is called math. The rents are not higher for some until the renewal of the lease. Okay. You really think the FED does not know this? Or that the Barrons has any credibility as a source?

Stop reading the Barrons. That is just a mistake.

Honest I will stop. I just have one question. Have you ever gotten anything of worth out of the Barrons?

Did anyone else get anything of worth out of the Barrons? I fear reading it. I think it messes around with people who will just take a suggestion like buy high sell low. Everything is a buy at the wrong time or a sell at the wrong time. It is not like people do each other favors by telling all to the Barrons.


I read the Wall St Journal daily. Also the New York Times and Washington Post. I subscribe to Bloomberg and get BusinessWeek every Monday. I visit CNBC and Fox several times per week, and subscribe to Apple News which gives me a spray of articles from 100 other publications. I love to read. Barron’s is just one, but since I have a subscription I can post links from time to time.

And yes, they are useful from time to time. Like almost any reasonable media source.


I’m with Goofy on this one. As I understand Krugman’s (and Goofy’s) position, the Fed can only impact economic activity and therefore it should be focused on inflation resulting from overheated economic activity. Food and energy prices are notoriously impacted by lots of noneconomic external factors, from drought to government mandates to OPEC decisions that the Fed can’t control. As such, they are unreliable indicators of the type of inflation relevant to the Fed.

As for used cars, I think most would agree that the recent high prices were due to supply issues caused by the pandemic from which the auto industry is only just recovering from. Again, not the best indicator of the kind of inflation relevant to the Fed.

Perhaps one reason why inflation is “sticky” is because there may be a significant number of goods that are still impacted by pandemic-induced supply shortages. These will be more resistant to rising interest rates.


The little I tried using the Barron’s twenty-plus years ago I easily found the publication catered to executives selling their shares before stocks plunged. I get they all do that.

No one comes out and do you a favor in any of these publications about timing when to buy.

My question really was have you been told to buy something on the early side in the Barrons? I did not spell out my question. As opposed to did you get the earnings reports? I do not care about the meat and potatoes of earnings reports I can get anywhere without subscribing.

There is a correlation between interest rates and mortgage rates. This impacts landlords collecting rents. This impacts when property managers buy and sell properties and their values.

This is constantly adjusting as mortgage contracts are signed. The FED is perfectly capable of adjusting the numbers to seasonal or monthly weighted averages.

If any of us were renting over the last year we’d be concerned with the rent inflation. It is an important segment of the inflation rate and the economy.

Because it is only a fraction of the report I would not overplay its importance to discussing the overall inflation rate.

To categorically dismiss it is inaccurate. The FED does not just put together numbers and then internally dismiss them. The FED maybe neutral but that is a different response.

Adding more to your point on overheated economic activity that has died down. But rentals were up there if you rented as overheating.

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Goofy already explained this. It is broadly accepted that rent is a lagging indicator of inflation. Most rental data is based on in-place rent, which means that the rental rate was set months before when the current lease was signed. Or as Jerome Powell himself states:

“Because leases turn over slowly, it takes time for a decline in market rent growth to work its way into the overall inflation measure,” Powell explained. Jerome Powell says it 'takes time' for slowdown in rents to show up in the Fed's inflation gauge | Morningstar

Since we all agree that rent is a lagging indicator, it is obviously not particularly useful for determining the inflation rate in real time. That’s Krugman’s position and I think he is right.

I don’t think the Fed and Krugman are in disagreement on this. Krugman is just willing to say it now while the Fed apparently wants to wait for the rental data to wind its way into the inflation measure and (hopefully) confirm the decline in inflation.

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Everything right now is a lagging indicator. All of it was acute last year.

Powell was speaking at one point in time. There are different answers at different points. The FED is not going to use interest rates without taking property values into consideration.

The main reason the FED was hiking rates is to take up the excess money supply. That was going into real estate. Rental inflation was acute in 2022 and the FED was calculating that. It was not a lagging indicator at that time.

The lagging indicator is the momentum of new and renewed leases rising into this period. Powell is speaking during this period.

The FED’s last rate hike was in March. This period after March all of it becomes lagging indicators. Powell was talking in August this year.

I do not know when Krugman was speaking but Goofy is speaking after the fire is put out and the embers are being doused.