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PPI without the Price


Fess up!


The PPI for February was just released at .1%.

If anyone can find one producer that agrees that prices for production have risen only .1%, I will apologize to the BLS for what I am about to say.

To the director of the BLS:

You have let this country down. Your agency is charged with releasing data that accurately reflects conditions in the economy. Market participants, ranging from institutional investors professionally managing large amounts of money to elderly people just trying to manage their retirement funds, use this data to make extremely important investment decisions, decisions that over time affect their lives in meaningful ways.

Instead of fulfilling your duty, your agency has done a great disservice by releasing misleading data that could in all likelihood lead investors to mis-allocate funds, an action that may be extremely damaging in the future. You have done this by eliminating the factual data, in this case several commodity price series from the Producer Price Index, which provides any relevance to real economic conditions.

The result is a PPI that significantly understates producer inflation. This in turn assuages market pressures to raise interest rates.

Artificially low interest rates force liquidity into riskier financial assets. This is particularly harmful, in the long run, especially for retired individuals, who not being able to earn a reasonable return on retirement funds in less risky assets, are forced to take on more risk. If these risky assets then under-perform, retired individuals could be at risk of losing essential capital, capital that cannot be replaced.

For what other purpose does your agency exist other than to provide accurate data? Or maybe the real question is, what influence could possibly cause your agency to abandon its charge?

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