ok, i hope i can piss everyone off quick here, but TIPS are a rip off, they have nothing to do with inflation. period.

http://www.shadowstats.com/inflation_calculator?amount1=100&y1=2008&m1=8&y2=2009&m2=8&calc=Find+Out

Let's be straight here, I am accusing the government of cooking the books. Anyone who believes government inflation data (the video included) is a... (insert your insult here)

So basically we have the shadow statistics site saying inflation is real, and we have the TIPS value, which says it isn't.

I'm watching the video again, the dude never explains why the difference is expectation of inflation, just that it is. No doubt he'd give some circular logic explanation anyhow. ... Ok he explains, its the "market" that moves these things. Never mind that the FED is buying these things, and the FED isn't a market, it can move the treasuries however it likes.

Anyhow i won't downvote even though it is crap, after all i'm just a layman.

Heres an article by a progressive that identifies the Government motive to fudge the inflation numbers.
http://www.huffingtonpost.com/michael-brenner/lies-statistics-and-econo_b_341149.html

Some people are predicting hyperinflation, but we all agree that isn't here yet. However the everyday crappy inflation is dogging us even though we are officially out of recession.

and, Netrunner if you aren't tooo pissed why did you post this? baiting me?

^ Baiting anyone who wants to fight with a very non-controversial statement.

I find it funny that people buy into the shadow statistics website. Why are their numbers more believable than the government's?

For that matter, if TIPS gives a payout based on government-based CPI, doesn't that mean this measure becomes an effective way to gauge whether the market agrees with the officially-published CPI? If the market believes the government consistently under-reports inflation, then wouldn't it bid up the constant-value yields, and make this test show that the market expects high inflation?

It's kinda the beauty of the test -- both yields are set by market forces, but the payout for TIPS will be adjusted by the government-reported CPI, while constant-value won't be. The spread is determined entirely by market-expected worth of the TIPS vs. constant-value.

Now, this isn't a way to measure inflation, it's a way to divine what the market consensus prediction about the 10-year rate of inflation is.

The way I see it, you have four possibilities:

1. The government is lying, and the market knows it.
   
   In this case, the constant value yield gives you an upper bound for the rate of inflation -- the market expects that security to pay back the rate of inflation + market interest of >0%.
   
   
2. The government is not lying, and the market knows it.
   
   The above is true, and the test as described can also be expected to be a reasonable predictor of the 10-year inflation rate.
   
   
3. The government is not lying, but the market thinks it is.
   
   In this case, we would see a high TIPS spread, but real inflation will be less than it predicts.
   
   
4. The government is lying, and the market doesn't know it.
   
   This is the Austrian belief. It means for some reason all the people controlling all the money in the world believe the Government's fraudulent statistics, while shadowstatistics.com, Peter Schiff and Ron Paul play the role of economic Cassandras.
   
   I don't see why smart (and therefore most) money wouldn't bet on their predictions, if they are indeed accurate. They have no new theory, or special information, and certainly aren't keeping what they know to themselves. As a liberal, I don't see why the market not listening to their "correct" ideas doesn't violate the basic premise of why we should surrender our lives to the infallible, prescient markets, but I digress.
   

from http://seekingalpha
.com/instablog/439442-thomas-macleod/13809-five-non-traditional-inflation-indicators-inflation-is-coming

"Accordingly it does not take a rocket scientist to work out that there is a vested interest to understate inflation."

I have to admit, finding a web page to disagree with netrunner was kinda hard. BUT I WILL NOT BELIEVE IN SANTA CLAUS. (or government statistics)

from http://seekingalpha
.com/instablog/439442-thomas-macleod/13809-five-non-traditional-inflation-indicators-inflation-is-coming

"Commodity prices outperforming long dated US treasuries have a respectable record of anticipating inflation."
and we see the year over year at 25%.

Let's not forget that people buy treasuries because they can sell them easily. Yes, they buy them because they don't expect inflation to bite them there. But these other measure of inflation ARE BETTER because people actually buy these to keep, not as a short term investment.

See, the internet wins arguments for me. I just had to find the one blog that agrees with me.

Moving this video to NetRunner's personal queue. It failed to receive enough votes to get sifted up to the front page within 2 days.