Perceived and Underlying Inflation Rates (Have You BEEN To The Grocery Store Lately, Trent?)
“Inflation is creeping in. Businesses are holding back. People are up against the wall.”
“Those
who live in ivory towers and pontificate about the ‘real’ economy while
being totally removed from it should really experience how the 99
percent live.”
“If you believe the BS stats, you are in the minority. Consumers KNOW differently. Core CPI, etc. What a pile of cowdung!”
Economists use adjusted measures of inflation, such as the seasonally
adjusted, core, and 16 percent trimmed mean indexes, because they are
looking for underlying trends that are relevant to the formulation of
economic policy. Changes caused by seasonal factors, and changes like
the price of oil, which are determined in world markets, are not highly
relevant to policy making. Consumers, on the other hand, look at price
changes as they happen in the real world, without seasonal adjustment.
Far from ignoring prices that change more than usual, they may give them
exaggerated importance. For that reason, the rate of inflation as
perceived by consumers is often higher than inflation as measured by
economists.
And, yes, I have BEEN to the grocery store recently.... :)
3 comments:
Hi, followed your link from SB forum. Interesting piece on inflation, inflation has always been tough for me to grasp and understand. Thank you!
It's only tough to grasp lately..Normally, an increase in the money supply will ALWAYS lead to inflation....We have tripled the money supply and inflation is low...I'm as baffled as the next guy...I think it may have to do with a "liquidity trap"..Which is a Keynesian idea...Most people on SB don't like Keynes and think he is the devil..lol...:)
I believe in the liquidity trap. Isn´t it kind of obvious that it is what´s going on?
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