May 20, 2012

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!”

Inflation is Quiet, So Why are People Still Feeling its Pain?


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.

U.S. Inflation Data: Seasonally Adjusted CPI Shows Zero Change For April

And, yes, I have BEEN to the grocery store recently.... :)


Will said...

Hi, followed your link from SB forum. Interesting piece on inflation, inflation has always been tough for me to grasp and understand. Thank you!

Trenton Ulysses Rock said...

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

Anonymous said...

I believe in the liquidity trap. Isn´t it kind of obvious that it is what´s going on?