Follow the blue line

The blue line are the total consumer prices divided by the total producer prices.  It represents the gain  of having producers sell to consumers.  The gain from doing that is still going down after the crash.  We either have to lower the standard of living or lower the transaction costs of producing consumer products.

Note again where the problem starts, 2003 the run up in oil prices and the tight coupling between real and nominal oil prices. We have been looking at this for almost three years since the crash. Housing peaked and crashed in 2006, but oil constraints continued until they crashed in 2008. The run up starts and ends with oil prices, housing was just an interlude, a diversion.


The futility of using debt to maintain a fake living standard is obvious since 2001.