Inflation is differential and restructuring (2021)
economicsfromthetopdown.com
Inflation is differential and restructuring (2021)
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Re: Inflation is differential and restructuring (2021)
#2This is an excellent article. It is well written, relatively easy to follow, and the explanations are well supported by data. Cheers to the author.
Re: Inflation is differential and restructuring (2021)
#3The title makes this sound like another conspiracy theory about the government suppressing inflation in official numbers, but the article is actually a rational dive into the non-uniformity of inflation across various categories.
The last section attempts to link "differential" inflation to oligopolies, and I'm not sure I buy their arguments there, but it's thought-provoking nonetheless!
Re: Inflation is differential and restructuring (2021)
#4The author talks about how accounting identifies are weird gotchas but the problem here isn't that there is a weird gotcha, the problem with MV = PT is that pretty much all variables are unknown except the general price level. Nobody knows what the real quantity of money is, nobody knows what the velocity is since it would require marking individual dollars and counting how many times they change hands.
Re: Inflation is differential and restructuring (2021)
#5The non-uniformity of inflation is interesting and has been brought up by many economists recently.
I wonder if eventually the Fed will try to track inflation as a vector rather than a single number.
Re: Inflation is differential and restructuring (2021)
#6The non-uniformity of inflation is interesting and has been brought up by many economists recently. I wonder if eventually the Fed will try to track inflation as a vector rather than a single number.
Indeed, it always annoyed me when the CPI a) excludes actual costs of living and b) alongside things like "food" included "flat-screen TVs".
Staple foods might cost 25% more, but hey, those TVs are down 20%, so yay!
An old company of mine was very proud that everyone's payrise began equivalent to CPI increase, before any other performance related increases.
That was nice, but it's a CPI that excludes rent/mortgage payments in a massive property bubble. When your rent that was already 40% of your net income goes up by 25%, CPI is meaningless.
When we suggested their base pay raise also consider that aspect, we got a blank stare and "no, no, CPI... "
Mind you, it's like the "unemployment rate", for statistical purposes, you're not unemployed if you worked somewhere for one hour plus, paid or unpaid.
So the percentage of our population on the unemployment benefit always tracks higher than the official unemployment rate.
I mean, I guess that's their measure, and it's useful for statisticians, but it's not meaningful for citizens.
Re: Inflation is differential and restructuring (2021)
#7The non-uniformity of inflation is interesting and has been brought up by many economists recently. I wonder if eventually the Fed will try to track inflation as a vector rather than a single number.
Indeed, it always annoyed me when the CPI a) excludes actual costs of living and b) alongside things like "food" included "flat-screen TVs". Staple foods might cost 25% more, but hey, those TVs are down 20%, so yay! An old company of mine was very proud that everyone's payrise began equivalent to CPI increase, before any other performance related increases. That was nice, but it's a CPI that excludes rent/mortgage pa…
> Staple foods might cost 25% more, but hey, those TVs are down 20%, so yay!
It's even worse than that because most of the time the TV price don't really goes down by 20%, but by 3% and hedonic adjustment makes it appear as if it went down by 20% in CPI because some people estimated that going from HD to 4K increased the value by 17% …
That's how we get figures saying that computers cost 20 times less than what they used to be when in reality it costs a little less than 2 times less.
Re: Inflation is differential and restructuring (2021)
#8The biggest argument against inflation as a monetary phenomenon right now is the foreign exchange rate: inflation is higher in the US than in the Eurozone, while a dollar is worth significantly more euros than what it was worth a year ago.
In fact, if your salary is labelled in dollar and you live in Europe, your purchasing power increased in that period, which shows that the current level of inflation in the US isn't cause by the intrinsic value of the dollar going down.
Re: Inflation is differential and restructuring (2021)
#9The biggest argument against inflation as a monetary phenomenon right now is the foreign exchange rate: inflation is higher in the US than in the Eurozone, while a dollar is worth significantly more euros than what it was worth a year ago. In fact, if your salary is labelled in dollar and you live in Europe, your purchasing power increased in that period, which shows that the current level of inflation in the US isn'…
This is a good case for why we're looking at a global phenomenon, but as far as relative inflation it's not that much higher in the US, and currency markets are taking into account what they think will happen in the future, i.e. without Russian energy the eurozone will see much more expensive goods. But even Japan went from deflation to 2.5% inflation in the past few months, so the forex markets are considering where those lines will cross over.
Re: Inflation is differential and restructuring (2021)
#10The biggest argument against inflation as a monetary phenomenon right now is the foreign exchange rate: inflation is higher in the US than in the Eurozone, while a dollar is worth significantly more euros than what it was worth a year ago. In fact, if your salary is labelled in dollar and you live in Europe, your purchasing power increased in that period, which shows that the current level of inflation in the US isn'…
Wait.. how can that be true? If a dollar last year is worth .5 dollars today, and a Euro last year is worth .8 Euros today, then surely the value of the dollar against the Euro has declined to .5/.8 of what it was last year?