Sunday, November 10, 2013

The Economist likes inflation

Amusing cover story.  Cover has a cartoon of a limp hot air balloon  sagging toward the sea, where sharks are gathering.  Anyhow the gist of the story is we don't have enough inflation, and central banks, (The Fed!) ought to pump up inflation again.  They spend some words trashing deflation (falling prices and wages) but they never get around to expaling why inflation is good for anybody.  Any how, they are in favor of more of it. 
   They never explain just which measure of inflation they mean.  US labor dept  keeps track of "core" inflation, usually everything except food and fuel. Food and fuel are "volatile" and that makes them evil.  Core inflation is services and manufactured goods, and is "purer" in the view of economists. 
   Unfortunately, they use "core" inflation for all those cost-of-living escalators in union contracts and social security.  Doesn't help me much.  I have to buy oil for the furnace, gas for the car and food for the bod.  My house is clogged with generations of manufactured goods, both hand me downs from the older generation and left-behinds from the children.  I don't buy new stuff much anymore.  But the Social Security cost-of-living escalator works on "core" inflation. 

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