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Strategies & Market Trends : New US Economy Policy -- Ignore unavailable to you. Want to Upgrade?

To: Arthur Tang who wrote (221)	4/17/2000 5:22:00 AM
From: Arthur Tang	Read Replies (1) \| Respond to of 435

Inflation and the new economy? The new economy is a planned economy. So how does inflation creep in? Via the cost of money, by the FEDs monetary policy? Traditional indexes are no longer suitable for comparison of inflationary trends. CPI for instance is weighted in the consumers' buying trend. Each product is weighted presumed in the shopping list of consumers. Consumers, however, do not follow the defined list of products or services that CPI included. Case in point, the role of VCRs in CPI. Today if you substitute DVD in place of the market saturated VCRs, CPI will go up quite a ways. DVD is over $200 each where as VCRs are less than $100 each. So, FEDs will have to modify their views on CPI when the new economy is obsolescence and replacement, meaning products and services are constantly changing. CPI will go up with the new economy. Therefore CPI has to be referenced against the growth of the economy. CPI1/GDP1-CPI2/GDP2= or < than 0 is not inflation. Only when CPI1/GDP1-CPI2/GDP2 is > than 0 then there may be inflation.