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swag

(26,480 posts)
Tue Apr 30, 2013, 11:41 AM Apr 2013

Krugman re-explains core inflation to knuckleheads

http://krugman.blogs.nytimes.com/2013/04/30/still-coring-after-all-these-years/

The idea of core inflation is to strip out the volatile prices to get a better measure of underlying trends. Core inflation is NOT used for things like cost of living adjustments, and it’s not the headline number in the news; so anyone who claims, with a knowing sneer, that the inflation number you hear is ignoring food and energy is just ignorant. Core is, however, what the Fed uses to assess monetary policy, because it believes that the headline number is too volatile, and it doesn’t want to overreact either to short-run inflation or short-run deflation.

Now, this could be all wrong. A surge in commodity prices could be the harbinger of sustained higher inflation; and that’s what a lot of people were claiming in early 2011, back when Paul Ryan was accusing Ben Bernanke of debasing the dollar, even as BB was basically saying don’t worry, look at the core.

So:



OK, what about the claim that the feds are faking the numbers? I could explain to you what they’re doing, and what’s wrong with the various critiques. But there’s an even easier route: we have independent measures. The Billion Prices Project uses prices off the web to construct its own index; it looks remarkably similar to the official CPI:



No, the core isn’t rotten — and inflation really is low.
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Krugman re-explains core inflation to knuckleheads (Original Post) swag Apr 2013 OP
It's always good to learn from Dr. Krugman... CTyankee May 2013 #1
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