8/08/2011

08-08-11 - Inflation - a sanity check


Fuel prices have risen faster than (nominal) inflation.

Education - much faster than inflation.

Housing faster than inflation.

Food faster than inflation.

Health care faster than inflation.

Gold, copper, etc. - much faster than inflation.

Foreign currency - faster than inflation.

Ummm....

Something is wrong with this picture.

4 comments:

Joel Bernstein said...

There are lots of non-inflation-related reasons why the price of something would go up, so it's entirely possible the price of everything would increase faster than the rate of inflation.

It's also possible for the CPI (calculated from the price of a particular set of goods) to change at a different rate than a different set of goods.

cbloom said...

Yeah, of course I get that, I've read all the standard introductory material on inflation.

I do think that when something goes badly against your intuition that it means there are strange forces afoot. Who knows what evil this winter may bring. Perhaps naught. But we shall prepare our defences nonetheless.

johnb said...

@Joel: As I understand it (and I'm happy to have my understanding improved, since it's basic at best), inflation is an effect, not a cause.

So talking about "non-inflation-related reasons why the price of something would go up" doesn't make much sense to me. The trend of prices increasing *is* inflation, independent of the cause(s) of that trend. Right?

cbloom said...

"so it's entirely possible the price of everything would increase faster than the rate of inflation."

Yeah, this is goes against the definition of the word "inflation" assuming you are using the standard meaning of inflation to be the cost of goods.

I can only assume that where Joel says "inflation" he means "increase of money supply per capita".

old rants