Rating: 
Summary: Inflation is too Low
Review: - LaRouche's 1983 Warning -
In the EIR's Oct. 4, 1983 edition, an article by Richard Freeman reported that the Federal Reserve, in collusion with the BLS, had been concocting such fraudulent factors, and using them to overstate production levels, while the BLS understated inflation, since 1967.
According to examples gleaned by EIR research at that time, one could conclude "that the real inflation rate since 1967, could have been one-third to one-half higher, or double, the `official' rate reported."
In a half-hour TV campaign broadcast on ABC-TV Feb. 4, 1984, Presidential candidate LaRouche presented the Quality Adjustment Factor hoax, plus another called the "Production Adjustment Factor." LaRouche stated that he and EIR had determined that the rate of inflation in 1983 had been faked by as much as three times--and should have been reported as three times higher than the official figures.
Rating:
Summary: A Difference of Opinion
Review: According to Jeremy Grantham, founder of GMO and manager of $48 billion (that's billion with a "B") in assets, the market is currently overpriced with a trailing P/E of 24. The trendline P/E is about 16 and Tanaka suggests in his book that it should be even higher than 24.In fact, Grantham reasons that the expected annual returns on large cap and small cap U.S. stocks over the next 7 years to be 1.4% and 2.5%, not some ultra bull market that Tanaka is suggesting that is driven by growing PE's. Why should we listen to Grantham? Simply put, he is respected in the investment community and has $48 billion to prove it.
Rating:
Summary: A Difference of Opinion
Review: According to Jeremy Grantham, founder of GMO and manager of $48 billion (that's billion with a "B") in assets, the market is currently overpriced with a trailing P/E of 24. The trendline P/E is about 16 and Tanaka suggests in his book that it should be even higher than 24. In fact, Grantham reasons that the expected annual returns on large cap and small cap U.S. stocks over the next 7 years to be 1.4% and 2.5%, not some ultra bull market that Tanaka is suggesting that is driven by growing PE's. Why should we listen to Grantham? Simply put, he is respected in the investment community and has $48 billion to prove it.
Rating:
Summary: Bloody Awful!
Review: As an educator of finance I read scores of business book per year (fortunately most of them are provided to me free of charge from the publishers), but it is a rarity that one is so bad that I feel compelled to besmirch it. However I've wasted hours reading this rubble and am irritated that this "book" could make it to publication. How does Tanaka think that lowering the Fed Funds rate beyond 1% will help? It is a pity that a somewhat educated man has not read Daniel Leigh's "Monetary Policy and the Dangers of Deflation: Lessons from Japan". Additionally, it is a poor all round read and is probably the most redundant thing I've read since Cat in the Hat. The only deflation I foresee, is the sales price as the publisher is left with piles of unread books. For environmental sake, I hope that if Tanaka ever feels compelled to write again, he will publish his work online and save some more worthy trees.
Rating:
Summary: Doesn't Make Sense
Review: Consider, the Consumer Price Index for all urban consumers is below 2% and the current Fed Funds rate is 1%. Mr. Tanuka suggests that inflation is mismeasured and should be lower, thus the corrected CPI would be -1 to -2%. Of course the fed would counter by decreasing rates putting our economy solidly in a deflationary period. An awful state Japan has endured for years. Would that mean the bank would pay me to borrow their money? Would I have to pay the bank to hold my money? This is left unaddressed. The Europeans have argued for years that the U.S. government has not overstated but, "understated" inflation by using the same fancy tricks that Tanuka wants to use more of. This argument is left unaddressed. Further, he says that as a result of this digital deflation, stocks should have higher multiples than they have now based on the inverse relationship between inflation and stock prices. But any 1st year math student will tell you that as inflation approaches zero (or negative in this case) the model breaks down. This silliness and oversimplification I suppose is reflective of what our society has become. Fad based. Everyone wants to try the new diet, everyone wants to get rich quick, and every hack wants to write a book, but unfortunately does not want (or has not the capacity) to do any real thinking. My father always told me that if you don't understand something, then you shouldn't show people how dumb you are by talking. Sage advice Mr. Tanuka.
Rating:
Summary: Doesn't Make Sense
Review: Consider, the Consumer Price Index for all urban consumers is below 2% and the current Fed Funds rate is 1%. Mr. Tanuka suggests that inflation is mismeasured and should be lower, thus the corrected CPI would be -1 to -2%. Of course the fed would counter by decreasing rates putting our economy solidly in a deflationary period. An awful state Japan has endured for years. Would that mean the bank would pay me to borrow their money? Would I have to pay the bank to hold my money? This is left unaddressed. The Europeans have argued for years that the U.S. government has not overstated but, "understated" inflation by using the same fancy tricks that Tanuka wants to use more of. This argument is left unaddressed. Further, he says that as a result of this digital deflation, stocks should have higher multiples than they have now based on the inverse relationship between inflation and stock prices. But any 1st year math student will tell you that as inflation approaches zero (or negative in this case) the model breaks down. This silliness and oversimplification I suppose is reflective of what our society has become. Fad based. Everyone wants to try the new diet, everyone wants to get rich quick, and every hack wants to write a book, but unfortunately does not want (or has not the capacity) to do any real thinking. My father always told me that if you don't understand something, then you shouldn't show people how dumb you are by talking. Sage advice Mr. Tanuka.
Rating: 
Summary: Investors and Policy Makers Need to Read this Book
Review: Graham Tanaka is a sucessful investor and economist who has written an important, insightful, thought provoking book that is a must read for investors and economic policy makers. "Digital Deflation" is written from an investors and policy makers perspective. It is readable and applicable to decision making. Readers will find sufficient quantative support to believe Graham's conclusions are solidly supported by fact. But readers will not be lost in theoretical gobbly gook that sometimes is found in economic text books. The book's analysis ranges from GDP accounting to evaluating how companies and stocks are responding to the New Economy created by increasing digital deflation. For me, the main benefit from reading "Digital Deflation" was that it allowed me to better understand and quantify how an increasingly digital economy is being incorrectly meausured and how this mistake is effecting investors, policy makers, the economy and markets. It also made me appreciate what future economic growth is likely to be if policy makers make correct decisions and if they don't. Graham, who believes that policy makers will not make large mistakes, argues that economic growth can be meaningfully and sustainably higher in the next 5-10 years due to the impact of increasing digitization. That is really important for investors. Although there is signficiant discussion of demographics and their impact on the economy and markets, the main "Digital Deflation" point is a convincing case that GDP, productiviy, and inflation measures are all being incorrectly meaured and misunderstood due to increasing advances in digital and software technology that is spreading throughout the entire economy. Medical products and automobiles are but two examples of two non-technology industries being beneficially and rapidly altered by digital deflation. Graham and a handful of economists and Fed policy makers are uncovering the depth of the mismeasurement and its implications. Anyone who understands the extent of the mismeasurement and how the New Economy is evolving will be able to better understand how the economy will behave in the future and how the markets will react. A key point from Digial Deflation: Graham convincingly makes the point that the trend toward digitalization is accelerating, not slowing, and that the economy can grow at a much higher growth rate than previously expected without generating inflation. If Graham is correct, and I think he is, then interest rates and Fed policy can/must remain more stimulative for a longer time than generally expected in order to generate job growth. That is good news for investors and corporations. Graham makes the point though that there is real risk to the economy, markets, and particularly employment growth, if policy makers do not understand digital deflation and don't provide sufficient stimulus to the economy when increasing digital content is generating productivity gains superior to any previous period in our history. The Bottom Line: Digital Deflation is a great read if readers have as a priority understanding how advances in technology are impacting the economy's growth potental, how economic statistics are messured, and how financial markets will react to all of these forces in the future. Reading "Digital Deflation" will allow a reader to better "connect the dots" between disparit economic reports such as GDP, jobs growth, inflation, productivity, corporate profits and financial markets reaction to their release. I believe I have a better view of how the economy and markets will behave under different levels of monetary and fiscal stimulus or restraint after reading the book. And because of that, I am glad I read the book and I recommend it to you.
Rating:
Summary: Investors and Policy Makers Need to Read this Book
Review: Graham Tanaka is a sucessful investor and economist who has written an important, insightful, thought provoking book that is a must read for investors and economic policy makers. "Digital Deflation" is written from an investors and policy makers perspective. It is readable and applicable to decision making. Readers will find sufficient quantative support to believe Graham's conclusions are solidly supported by fact. But readers will not be lost in theoretical gobbly gook that sometimes is found in economic text books. The book's analysis ranges from GDP accounting to evaluating how companies and stocks are responding to the New Economy created by increasing digital deflation. For me, the main benefit from reading "Digital Deflation" was that it allowed me to better understand and quantify how an increasingly digital economy is being incorrectly meausured and how this mistake is effecting investors, policy makers, the economy and markets. It also made me appreciate what future economic growth is likely to be if policy makers make correct decisions and if they don't. Graham, who believes that policy makers will not make large mistakes, argues that economic growth can be meaningfully and sustainably higher in the next 5-10 years due to the impact of increasing digitization. That is really important for investors. Although there is signficiant discussion of demographics and their impact on the economy and markets, the main "Digital Deflation" point is a convincing case that GDP, productiviy, and inflation measures are all being incorrectly meaured and misunderstood due to increasing advances in digital and software technology that is spreading throughout the entire economy. Medical products and automobiles are but two examples of two non-technology industries being beneficially and rapidly altered by digital deflation. Graham and a handful of economists and Fed policy makers are uncovering the depth of the mismeasurement and its implications. Anyone who understands the extent of the mismeasurement and how the New Economy is evolving will be able to better understand how the economy will behave in the future and how the markets will react. A key point from Digial Deflation: Graham convincingly makes the point that the trend toward digitalization is accelerating, not slowing, and that the economy can grow at a much higher growth rate than previously expected without generating inflation. If Graham is correct, and I think he is, then interest rates and Fed policy can/must remain more stimulative for a longer time than generally expected in order to generate job growth. That is good news for investors and corporations. Graham makes the point though that there is real risk to the economy, markets, and particularly employment growth, if policy makers do not understand digital deflation and don't provide sufficient stimulus to the economy when increasing digital content is generating productivity gains superior to any previous period in our history. The Bottom Line: Digital Deflation is a great read if readers have as a priority understanding how advances in technology are impacting the economy's growth potental, how economic statistics are messured, and how financial markets will react to all of these forces in the future. Reading "Digital Deflation" will allow a reader to better "connect the dots" between disparit economic reports such as GDP, jobs growth, inflation, productivity, corporate profits and financial markets reaction to their release. I believe I have a better view of how the economy and markets will behave under different levels of monetary and fiscal stimulus or restraint after reading the book. And because of that, I am glad I read the book and I recommend it to you.
Rating:
Summary: Blue Money Report
Review: Graham Tanaka was bouncing around the airwaves recently promoting his new book and the silly argument that productivity can be calculated according to the latest GDP. His 120% notion or as he explains it, 1% of increased productivity equals a 1.2% increase in GDP or 120% increase over nothing is a little risky of an assumption. The methodology used is at the heart of what many should begin to look at as a false recovery. Tanaka, who seems like a very nice gentleman and noted economist as well is telling us that if inflation stays low, fiscal stimulus stays brisk and accommodative, and technology continues to increase at the same pace as it is currently occurring, this will force the cost of technology down while increasing productivity. The end result of all of that progress will be profits and prosperity for decades to come. Maybe, maybe not. If the current GDP numbers are any indication, technology had very little to do with it. Last quarter was the result of more than just lower prices for technology - as yet in any real demand. It was rebates and tax cuts, a one time occurrence that primed the economic pumps, as well as still cheap refinance money and credit. This helped consumer drive their share of the market. But productivity comes from business investing and that is still not quite there. That is largely because, no matter how business tries to calculate Mr. Tanaka's equation, a company must assume that the statistics published by the Bureau of Labor Statistics are accurate. And they seem to not want to believe those numbers. The BLS has the ability to keep inflation low as they incorporate what the Europeans call quality changes into their calculations. These quality changes, the assumption that quality changes will drive down prices as new products are introduced. For instance, computers are a million times faster than the first one built fifty years ago. If the BLS were to quantify such an assumption, these computers would be worthless. The cost of that first computer was a million dollars. Considering how fast they have gotten and how many are sold in the US each year (10 million), this would mean that the quality of the technology has increased 1 trillion dollars while at the same time lowering the price to, you guessed, it... nothing.
Rating:
Summary: Keeping inflation down was actually causing deflation
Review: His theory points out the government measurement of the state of economy was done with missing key components which are the sources of new economy drivers: digialization. The monetary policy derived from the missing measurement, digital deflation effects, would lead to a bad policy. Indication of low inflation was actually "deflation". Graham Tanaka has an excellent insight! Everyone should read this book.
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