I am a builder, and I can tell you that, here in Oregon at least, in my business, inflation is NUTS!

Al

-- Al K. Lloyd (all@ready.now), September 20, 1999

Answers

That is old spin... Inflation is ridiculously high, unless you ask a government official...

House prices - 1970 - avg 10,000 - 20,000

House prices - 1999 - avg 200,000 - 400,000 depending on location naturally...

Car prices - 1970 - avg 3,000 - 5,000

Car prices - 1999 - avg 21,000 - 30,000

Can you say inflation? say it with me... I-N-F-L-A-T-I-O-N...

Decker, you are the economist, could you elaborate on how the low inflation number fed to us by our fearless leaders correlates to what Al and I are talking about???

It just doesn't wash...

growlin' at C-SPAN on TV...

The Dog

-- Dog (Desert Dog@-sand.com), September 20, 1999.

Al,

Food prices are way up, gas is up 50 cents a gallon in a month. Phone, cable, electric...bla bla bla....way up. Government figures are bull. We are being led down the rosy lane.

-- (IagreeWith@Al.com), September 20, 1999.

Just wait until the economic meltdown....hehehehehee!

-- Billy-Boy (Rakkasn@Yahoo.com), September 20, 1999.

Al,

The gov't stats releases last week bear you out. I believe wholesale prices were up at a 6% rate, but the core inflation rate was negligible. They get to the core rate by eliminating the effects of food and energy. It's pretty difficult to live without food & energy, so it seems to me the overall increase of 6% is the real number.

The 6% number represents the wholesale price increase. Consumer prices typically increase AFTER we see moves up in the wholesale number. This suggests that we, as consumers, ain't seen nuthin' yet.

Workers' wages are increasing less than 6% so these numbers are ominous. Consumer spending ( a key to the economy's health) has to slow down if inflation outpaces salary increases. These are not good signs because none of these gov't stats reflect the impact of the discolations that will be caused by the bug.

-- mike (maples@voy.net), September 20, 1999.

We are enjoying a period of zero inflation. The Feds calculate inflation by excluding those products that are not going up in price. This is essentially the same math used to calculate corporate profits: anything that costs them serious money is a one-time write-off.

-- Dave (aaa@aaa.com), September 20, 1999.

As an afterthought, it would be nice to hear some more first-hand (albeit anecdotal) observations on rising prices.

-- Dave (aaa@aaa.com), September 20, 1999.

Inflation???? where???

Example: at one point last year the price of a gallon of oil was below 1929 prices. (taking inflation into account) Of course most of us don't know that if we are paying $1.15 for a gallon of gasoline. $.50 cents is taxes.

Also, look at telecommunictions,, .05cents for a 1minute longdistance call. Look at computers, look at video cameras.

This is the biggest con job ever perpetrated on U.S. citizens!!!

Just eveybody keep buying more stuff, because once we stop buying and start saving, it all comes tumbling down!!

-- David Butts (dciinc@aol.com), September 20, 1999.

http://www.bos.frb.org/economic/nerr/hell97_1.htm

http://www.dismalscientist.com/thoughts/inflation.stm

http://www.dismalscientist.com/thoughts/cpi_new.stm

Inflation is a topic large and complex enough to create its own subspeciality in economics. As "Dog" accidently demonstrates, inflation is difficult to measure. The size of the average American house has doubled since the 1950s. Having restored a 1952 Chevy pickup, I can say that automobiles have changed as well. How can we accurately compare prices of products that have changed radically over time?

As most Internet-savvy folks know, advances in technolgy continue to drive down computer prices (in terms of "bang for the buck.") During a recent visit to Costco I noticed a four-head VCR for $80. Wow!

The quick definition of inflation is the general increases in prices. The CPI and PPI, two common inflation measures, use a "marketbasket" approach. As noted above, the tricky part is what goes into the marketbasket... and when do you change the mix.

Of course, like many economics issues, this is a huge political issue. Many entitlements, pensions, subsidies, etc. tie increases to inflation indices. A change in calculating inflation can results in billions of dollars of impact... with the inevitable winners and losers.

While inflation has a personal impact, most consumers buy a rather narrow range of goods and services. In short, it's hard to tell if we are experiencing inflation based on the price of gas.

The past few years have created an unusual lull in inflation. Imported goods have been less expensive due to the economic woes abroad. Oil and other commodity prices (dare I mention gold?) have languished. Despite huge injections of liquidity into the system and a tight labor market, we have not seen much inflation.

Here's a word from your friendly "nonpracticing" econo-guy... those chickens are coming home to roost. Count on some future Fed increases... depending on the impact of Y2K. Ironically, Y2K could take enough steam out of the economy to stall inflation. Were I Alan Greenspan, this might seem a far more elegant solution than having to "go Volcker" on an overheating economy.

Hope this helps,

-- Ken Decker (kcdecker@worldnet.att.net), September 20, 1999.

Previous feeble post of mine had an inadvertent "not" in it. Oh welp. More seriously, there is no way energy costs can rise without inflation setting in. As to the Feds' numbers excluding energy, if they really do exclude the contribution from energy, are essentially worthless. I've come to believe these reports are "cooked" to futility anyway.

-- Dave (aaa@aaa.com), September 20, 1999.

Al,

Don't know where the hell the gubmint is gettin them numbers from, but they haven't been shoppin at my grocery store that's for sure. Many items have nearly doubled over the last say, 6 months or so.

-- @ (@@@.@), September 20, 1999.

Mr Decker,

Thanks for your reply, I value your opinion...

bitin' at a fly...

The Dog

-- Dog (Desert Dog@-sand.com), September 20, 1999.

<< The quick definition of inflation is the general increases in prices. >>

I don't think this is correct. I believe inflation has traditionally been defined as an increase in the money supply. I think that the redefinition of inflation as rising prices is rather recent.

-- David Palm (djpalm64@yahoo.com), September 20, 1999.

>> I don't think this is correct. I believe inflation has traditionally been defined as an increase in the money supply. <<

The problem with this definition is that, once the Industrial Revolution really got a head of steam, the money supply can be increasing, but at a slower rate more than the increase in the amount of goods produced. This causes *exactly* the same problems as a shrinking money supply with a steady amount of production.

So, your "traditional definition" results in inflation being indistinguishable from deflation under some fairly common circumstances. At that point, the "traditional definition" becomes pretty useless, a formalism that has no practical application.

-- Brian McLaughlin (brianm@ims.com), September 20, 1999.

You have to distinguish and define what are you measuring. CPI, (monetary) inflation, COL (cost of living)... I leave this as an exercise for the students.

-- A (A@AisA.com), September 20, 1999.

Well I for one can no longer afford fresh fruit, and though the alternative of feeding my kids chemical packaged "stuff" creeps me out, it has become a neccessity. The cost of a dumpy closet to live in around here starts at $120,000. And going to the movies requires our expendable income for the week. As for Greenpondscum, my best guesstimate is that he is on medical Mary Jane.

-- Gia (laureltree7@hotmail.com), September 20, 1999.

Of course, the government inflation numbers are a lie. When the price of oil rises quickly, everything goes up. We pay for it at the pump, in the cost of transporting goods, in air fares and public transportaion, in our utility bills, and for the raw materials in all the plastic products that we buy. What is the core rate anyway, when you exclude energy and food. Try to live without them.

-- Mr. Adequate (mr@adequate.com), September 20, 1999.