well finally a sensible person in the conversation. To be honest with you Random, I am not really sure what inflation is. But I know what it is not.
"The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling." Right, just so long as there is no "wage inflation", there's no inflation. So if we pay more for gas, health insurance, property taxes, food because "someone, somewhere" is raising prices, we still can't call it "inflation" because the two of you decided that it wasn't "inflation".
Yeah, agreed. Come on guys, are we really playing a semantics game here - you know exactly what I'm talking about. When I go to the doctor and treat my "cold" and the insurance company codes it "medical illness", aren't we talking the same thing here? Some of you must be working for the government. Price inflation increases (how's that, I used them all contiguously) is killing the average American, and unless you work for one of the public sector unions, your wages are certainly not even close to keeping up. This is a serious problem in our country. I'm really glad that Bubble Ben is fattening your 401K accounts currently, but mark my words, watch out below, and soon. In the meantime, I have some serious inflation problems to deal with.
As you know, there are a great many measures of inflation, depending on what specific inflation rate you want to measure, and what you want to take into account when you do that. The Federal Reserve economists use the measures of inflation that best suit their purposes. The John Williams website posts measures of inflation computed as they were previously computed by the government before hedonics began being used. This makes it easier for those interested in comparing inflation today with inflation in the past. As it turns out, using older methods of computing inflation results in an inflation rate that is closer to what ordinary citizens experience in their everyday lives. This is why I refer to the William's numbers as the "real" inflation rate. But of course, technically all the inflation measures are "real" by definition. Which one you want to use will depend entirely on your purpose, and is entirely up to you... Obviously, if you are interested in comparing inflation today with inflation 30 years ago you should use the same method for computing both numbers, if you can. Shadowstats.com makes that an easier, if not flawless, task.
ok, but there is a difference between prices you complain about and the value of your money decreasing everyday. Crude and gold are probably better measures than healthcare and education, and even crude suffers from demand destruction so it is not really a good measure. Like I said, I don't really know what inflation is, but I am old enough to remember it and it was flat out crazy. There really was no way to beat it. People were buying Lazy Boy chairs and barbeque grills now on credit because they knew in a year it would be priced higher and the money they were paying back the loan in would be worth less and everybody knew their salaries were going up anyway.
Thanks for chiming in. Wow gas here in Denver Metro is $3.60 a gallon. I knew that Canada has a housing bubble, but with the constant influx of Chinese buying everything up you seem to have plenty of demand, at least that's what my Canadian friends have said about Vancouver and Toronto. It's so bad my buddy calls it Hongcouver.
When the average person uses the word inflation they are referring to price inflation, and at that level at least they are not usually concerned with what has caused it. Price inflation isn't a symptom of price inflation, it IS inflation. (It needn't be necessary to point out all of the possible causes for inflation. Most of us know the various causes already.) So what caused the present inflation the U.S. is experiencing? answer: The root cause is deficit spending and consequent borrowing beyond what can reasonably be paid back through productivity in the economy and the tax revenues that result from such productivity. At first there is the accompanying expectation that some of the new debt will be monetized, and in the end there is the recognition that some of the new debt is being monetized.. The immediate cause, however, is lowered demand for dollars in anticipation of debt being monetized. Inflation results in debts being paid back with dollars that have less purchasing power than the dollars borrowed. This in effect lowers the cost of borrowing and is favorable to individuals or countries in debt so long as one's, or a country's, income increases at a rate equal to or greater than the inflation rate.
Just went to Hong Kong couple of weeks ago. From what I've heard, a small apartment (500 sf) there could cost half a mill or more easily so it must be a bargain to buy 2000 sf home over seas for similar amount. In my birth country Vietnam, inflation is more like 12-15% a year and similar in China so something to keep in perspective. There's just too many people chasing the same amount of goods and resources are getting more difficult to procure every day.