Say Anything Blog

Call me skeptical but if inflation has been tamed then how come stuff costs me more and don’t get me started on excess liquidity in the financial system. I suspect that the stock markets will continue to go up until they don’t anymore.

Got gold?

"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced if the nation doesn’t want to go bankrupt. People must again learn to work, instead of living on public assistance.”
Cicero, 55 BC

MikeA: To understand the truth here, you have to know what inflation is.  It’s not as simple as an increase in price, either of one particular item or of prices in general.  In the first place, many things, mostly tech stuff, has actually decreased in price, especially if that market hasn’t been subjected to govt interference.  The real nature of inflation is when price increases without a commensurate increase in value.  If the price of a computer stays the same, but that computer does more, is faster and has more features and bundled software, that is the opposite of inflation.  If you get more options on your new car, and it costs more, that is a buying decision on your part, and does not represent inflation.  After all, in the free enterprise system, we are not helpless victims of anyone other than govt, through their taxation and regulation behavior.

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r108...that would be the magic of hedonic adjustment I believe. You don’t really subscribe to that chicanery do you? Mises would be very disappointed.

"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced if the nation doesn’t want to go bankrupt. People must again learn to work, instead of living on public assistance.”
Cicero, 55 BC

r108...that would be the magic of hedonic adjustment I believe. You don’t really subscribe to that chicanery do you? Mises would be very disappointed.

A truly nonsensical and non-substantive reply from you, Mike.  Anything factual?

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Try this is you’re interested. I’d also note that suspicion of contemporary inflation figures is not unusual.

"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced if the nation doesn’t want to go bankrupt. People must again learn to work, instead of living on public assistance.”
Cicero, 55 BC

I wonder if this has to do with the presidential election cycle at all? ...you know, making the incumbent look like a hero type of thing, naahhh

In terms of inflation adjusted dollars the market indexes are below year 2000 numbers.

$117 is needed to purchase what cost $100 in 2000.

Stock market prices, being the result of an auction process, are not subject to inflation directly.  Your static analysis is also flawed in other ways, Woof.

The product mix in 2000 is vastly different than it is today.  Flat-screen TVs, just to name one product.  The CPI is only a rough guide to inflation/deflation in an economy as innovative as ours.  During the Carter administration, for instance, the prices of everyday items increased much more than the reported rate of inflation, which was weighted toward long term commodities, like household appliances, and didn’t reflect the real amount of damage the Carter economic policies were doing to the American public in his lust to play to his union buddies.

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MikeA: Read your link.  If you sweep aside the semantic babble, there is some truth in it.  Quality is certainly a factor, which is why people who become more affluent(a quite common occurrence here in the US) generally buy better(and more expensive) stuff.  The entire consciousness of only considering price when trying to calculate inflation is ignorant in a free enterprise system.  In a command system, it can be either created or dismissed by govt decree, but the black markets tell the real truth.  The proper price of anything is determined by market forces, and any inflation is produced by govt interference, at least in the long term.
Price increases due to temporary shortages produced by short term fluctuations in demand are not really inflation, in the economic sense.
Real economic evaluation and analysis must take increasing quality into account to be meaningful.  Calling it “hedonics” is simply a snotty, dismissive way of dealing with an important factor in the economy.  Collectivist types have a never-ending contempt for the judgement of individuals, who have nevertheless built the most successful economic engine in history.

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Calling it “hedonics” is simply a snotty, dismissive way of dealing with an important factor in the economy.

What an odd thing to say. I agree that quality improvements must be taken into account but it is still an area ripe for manipulation in unscrupulous hands.

I also thought that inflation was essentially a monetary phenomenon although I confess its been a while since I’ve read my Friedman. Be that as it may, I maintain that the CPI figures released each month understate the true measure of inflation in most economies these days.

"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced if the nation doesn’t want to go bankrupt. People must again learn to work, instead of living on public assistance.”
Cicero, 55 BC

What an odd thing to say. I agree that quality improvements must be taken into account but it is still an area ripe for manipulation in unscrupulous
hands. Only if the govt gets involved. This kind of thing is just what free markets prevent.

I also thought that inflation was essentially a monetary phenomenon although I confess its been a while since I’ve read my Friedman. Just use common sense(real common sense, that is); if something becomes more expensive without an increase in value, it is inflated, whatever the reason for the price increase besides an increase in quality.  The primary engine of our economic system is the individual consumer, who constantly makes price/quality decisions.  Therefore, quality is the primary determinant of whether the individual decides to pay the going price for anything. This is no place to be discussing elasticity, but it only shifts things, it doesn’t change the basic truth of the free market. Be that as it may, I maintain that the CPI figures released each month understate the true measure of inflation in most economies these days. They are certainly inaccurate, but not in any particular direction, except during the Carter admin, when they were grossly understated.

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