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Politics : The US Deficit
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To: Lazarus_Long who wrote (16)10/8/2007 4:42:01 PM
From: TimF  Read Replies (1) of 32
 
I regard the fed gov'ts CPI and PPI index as suspect. They have too many reasons to understate inflation.

Suspect, is correct but there are good reasons to think they overstate inflation as well. Consider real income stats, and then consider what people have now compared to what they had a couple of generations ago. In many ways what people actually have now has improved more than would be demonstrated by any chart of real per capita income or wealth.

Inflation isn't nearly as simple as many people think it is. Most people look at inflation as an increase in prices. If you define it that way you have some difficulty measuring the exact price changes and a lot more dificulty adjusting for the fact that the the goods that people own, buy, consume etc. aren't the same from year to year.

In a technical sense inflation is a purely monetary phenomenon, but there are different ways to measure the money supply, their ate considerations of velocity, and than there is the fact that you can't just measure the money supply but have to compare it to economic output (if they both increase at the same speed you don't have inflation), but exact output is hard to measure over time to a large extent for the same reason that inflation is hard to measure over time. The things we produce change over time. Brand new things get invented, old things become obsolete, and even something with the same name is different that it was in the past.
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