Wednesday, April 13, 2011

Inflation 9%+?


Now we have the "old-style" inflation measure telling us that actually, inflation is around 9.6%.

Nine point six percent.

The "official" measure is far smaller.

People who actually shop--the 'ground-level' as it were--have been talking about prices for a few months. That's because food prices are going up quickly.

On the other hand, the professional econocrunchers have been saying "Nope. No inflation here."

Notice how Volcker and Greenspan (Reagan and Clinton) changed the inflation index:

Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site,

The "new method" postulates that when steak is too expensive, you'll buy hamburger instead, so voila!! no inflation. Since you get 4x the processing power from a new PC that you had with the old one, the new PC only "costs" 1/4th what the old one did.

Get it?

I didn't think so. See, when cereal, butter, eggs, and milk are climbing Mount Everest and gasoline is not far behind on the trek, you don't really notice how shiny the new processor is.

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