The View From 1776

More On The Nature Of Inflation

It’s more complex than most citizens assume.

Posted by .(JavaScript must be enabled to view this email address) on 01/07 at 03:07 PM
  1. Bob,

    Thank you for your thoughts on inflation. I think it is safe to say that most economists think of inflation as a rise in the general level of prices quoted in units of money. Most people take the "Consumer Price Index (CPI)" as a fairly unbiased indicator of the amount of inflation. There is, of course, no question that with inflation occurring, a dollar buys less every year.

    Historical annual rates of inflation in this country since 1991 have varied between 1.6 and 3.3 percent. Inflation during the Obama years has been below that of the Bush years.

    Some economists argue that a small amount of inflation is a good thing to provide "grease" to the economic system.

    As you noted in your piece, the screams of imminent hyperinflation by some have not been borne out by the data, and at some point, it would seem incumbent on those folks to admit that their economic model is faulty.
    Posted by .(JavaScript must be enabled to view this email address)  on  01/07  at  06:16 PM
  2. J. Jay,

    Once again, you are giving us opinion without any reference to source, evidence or hard fact. I have already shown inflation involves more than just money and prices, that CPI
    Posted by .(JavaScript must be enabled to view this email address)  on  01/08  at  01:22 PM
  3. MIT Billion Prices Project:

    "Your eye-lids are becoming heavy. Pay no attention to the bread prices going up 50% in the last month. Pay no attention to steeply rising prices for peanut butter and peanuts and real nuts and other substitutes for higher-quality protein sources. Pay no attention to gasoline prices over 3 times what they were in 1999. Pay no attention to the smaller jars at the same price. Repeat after us: There is no inflation. There is no inflation. There is no inflation."

    I find it most interesting that CPI, WPI (now PPI) and the old GNP implicit price deflator tracked each other very closely from the projections back into the 1800s until the redefinitions in the early 1990s, but now are drastically diverging. And how many are the sins hidden by the discontinuation of M3 reporting.

    graphs and links
    Posted by .(JavaScript must be enabled to view this email address)  on  01/08  at  03:57 PM
  4. Bob,

    I think your comprehensive data track reasonably well with my statement that the annual inflation rates were between 1.6 and 3.3% over the last two decades. The year in which inflation that most exceeded this range, 2007 to 2008, the last years of the Bush administration, was 4.28%, according to your data.

    The C.P.I., Consumer Price Index, is the price of a "market basket" of items common items tracked over a number of years. Tracking these data seems like a fairly low tech and reasonably unbiased way to access inflation to me.

    And Bob, I don't think I am nearly as rigid in my thinking as you accuse me of and hardly, I think, a "perfect exemplar of a purblind ignorance!"
    Posted by .(JavaScript must be enabled to view this email address)  on  01/13  at  12:56 PM
  5. J. Jay,

    Purblind: lacking in vision, insight, or understanding; obtuse
    Ignorance: the state or fact of being ignorant; lack of knowledge, education, or awareness

    Source: Merriam-Webster online

    There can be little doubt you are woefully ignorant on the subject of inflation, and obtusely so, because you a) persist in confusing CPI with inflation rather than the simple indicator or barometer of inflation that it is, b) you repeatedly confuse or deliberately conflate datasets saying widely different things as though saying the exact same thing, and c) keep returning to the same place despite efforts to move you toward more beneficial (to you) lines of reasoning; hence
    Posted by .(JavaScript must be enabled to view this email address)  on  01/13  at  10:59 PM
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