Economists: "If You Don't Eat or Drive, Inflation's No Problem"

[DeepModem Mom]

NYT: If You Don't Eat or Drive, Inflation's No Problem
By DANIEL GROSS
Published: October 23, 2005


ASIDE from the stuff that's becoming more expensive, like food and energy, there is no problem with inflation in the economy. That's the message economists want us to take from recent inflation reports.

On Oct. 14, the Bureau of Labor Statistics said the Consumer Price Index, the main inflation gauge, rose by a whopping 1.2 percent in September and by 4.7 percent in the last 12 months. The bureau also said the Producer Price Index, which measures inflation experienced by businesses, rose 1.9 percent in September alone.

Amid these alarming reports, many economists urged Americans to remain calm and to focus on the so-called core C.P.I. - the inflation measure that excludes the volatile costs of energy and food. The core rate rose just 0.1 percent in September, and is up only 2 percent in the last 12 months.

The dueling numbers seem to offer a classic case of how economists and consumers view the world differently. If only we lived in some futuristic biosphere where we didn't need energy or food, inflation wouldn't matter.

Government economists have been stripping out energy and food costs from the price gauge for more than three decades. After the Arab oil embargo of 1973, Arthur Burns, who was then the chairman of the Federal Reserve, correctly reasoned that temporary shifts in the price of oil shouldn't influence monetary policy unduly. So he asked Fed economists to show him a measure of price changes that excluded energy costs. Later, he asked for one that also excluded food costs....


http://www.nytimes.com/2005/10/23/business/yourmoney/23view.html

[YDogg]

1. Or use electricity or heating oil?

:+

[Solly Mack]

2. well, guess it's a good thing gas is too expensive to drive to the store

to buy groceries then...


Just trying to look on the bright side

(unreal)

[Turbineguy]

3. The Republicans

ran such a good government.

Then I pulled my head out of my ass.

[BuelahWitch]

4. The bright side:

Your body will keep alot longer when you die from starvation in your cold house/apt.

[Deja Q]

5. I hate to say this, but...

I've seen prices at my local grocers go up. Shockingly in some cases...

Yet at sams club prices have yet TO go up.

I'm not trying to hype up sams club, but isn't it a bit odd how they are not raising prices? (at least, not yet)

In short, the problem might be with the end retailers rather than the middle men...

[ClintonTyree]

8. Sam's Club buys goods by the warehouse full.......

they have yet to restock those warehouses in my guess. It'll hit them soon enough, no one can avoid it.

[BadgerKid]

6. new media tack

Is this a sign of the new anti-panic-inducing press?

[DeepModem Mom]

11. Thanks for posting, BadgerKid -- and welcome to DU!

[newyawker99]

14. Hi BadgerKid!!

Welcome to DU!! :toast:

[teryang]

7. Accounting for housing prices increases rigged as well

This article is little more than a sophisticated denial. Many economists understand that the CPI figures like the unemployment figures are faked for political consumption.

[Lindsay]

17. Unfortunately for them,

many consumers understand this as well.

[Spinzonner]

9. Aside from that arrow in your chest, you're perfectly healthy

Mr Custer

[LibDemAlways]

10. Don't they exclude the cost of housing as well?

If they figured it in, the numbers would be off the charts. Here's what 729K currently buys in Southern California. 5 years ago this home would have sold for around 299K.

http://realtor.com/FindHome/HomeListing.asp?snum=26&locallnk=yes&frm=byzip&mnbed=0&mnbath=0&mnprice=500000&mxprice=99999999&js=off&pgnum=3&fid=so&mnsqft=&mls=xmls&areaid=91377&typ=1%2C+2%2C+3%2C+4%2C+5%2C+6&poe=realtor&zp=91377&sbint=&vtsort=&sid=058C484AE10CC&snumxlid=1050234355&lnksrc=00002

[ultraist]

15. A small dated ranch for 700k?

In my area, you can get a nice 4000 sq ft home, half an acre, with a private pool for that price:

http://www.realtor.com/FindHome/HomeListing.asp?snum=36&locallnk=yes&frm=bymap&mnbed=0&mnbath=0&mnprice=400000&mxprice=800000&js=off&pgnum=4&fid=so&mnsqft=&mls=xmls&areaid=85528&typ=1%2C+2%2C+3%2C+4%2C+5%2C+6&poe=realtor&ct=Cary&st=NC&sbint=2&presort=sbint&sid=058C5B448120C&snumxlid=1048434859&lnksrc=00004

[LibDemAlways]

18. That home in Southern California.....

easily 2 million.

[qanda]

12. Everything, and I do mean everything, I need has gone up

Clothes, shoes, gas, electricity, healthcare, medicine, food and housing have all increased. How do they expect people to make it?

[leesa]

13. Think landowners and serfs...bare sustenance for you, and if you don't

have that, so what? If you drop, they just plug another worker bee into your spot. They don't care if you have healthcare, medicine, etc. You just need enough to keep working for them.

[Selatius]

16. 4.7% in just 12 months. If this keeps up, it will be like 1970s inflation