Sunday, April 24, 2011

Core Inflation vs. Reality

So it’s hard to miss that we’re paying $1.50 more per gallon of gas these days then we were a year ago. It’s also hard to miss that, at the grocery store, a package of butter costs a dollar more than it did just a couple of months ago.

So it’s no surprise to read news reports about rising food and fuel prices, or to hear experts say they’re concerned about the chilling effects of such rises on the economy.

What is surprising is to read that core inflation is chugging along at a modest 2%.

Gosh, that hardly seems like anything to worry about.

Until you learn that “core inflation” specifically excludes measures of food and fuel prices.

Um, excuse me, but other than mortgage payments and internet service, food and energy are actually the only things we’ve spent money on this year. I drive to work, then I drive home to a house where I get a nice hot meal in a house that’s heated, hopefully, to a temperature that’s tolerable if I wear long underwear and two sweaters. Ben Bernanke will have to forgive me if I’m not stocking up on iPods and furniture and designer shoes to take advantage of this modest inflation rate.

Anyone else out there get the feeling that our government experts aren’t really acting with the best interest of the citizenry at heart?

Either that, or they simply have no idea what they’re doing.

I’m not sure which is scarier.


  1. You're *just now* getting that feeling? (:

  2. There's an old saying: "Statistics don't lie; statisticians lie."

    The formal economic definition of inflation has to do with the total money supply versus its value represented in goods and services. But that isn't the metric commonly used these days; instead, we have the "consumer price index," which has been intensely managed and manipulated over the last decades for political purposes, and has nothing to do with the economist's definition of inflation.

    Neither does the CPI have anything to do with how much money the "Federal" Reserve requires the US Treasury Department to print, which determines the total money supply in circulation (the numerator in the inflation formula).

    We pretend to have a representative government, while they pretend to represent our best interests. We call that "democracy". It requires the suspension of disbelief on both sides.

    Thanks for posting.