Skip to comments.The Surprising Disappearance of Inflation
Posted on 10/22/2015 8:43:19 AM PDT by Kaslin
In a world in which the Cold War is a fading memory, North Korea and Cuba endure as museums of communism, so no one will forget how criminally insane it always was. In a world haunted by the specter of persistently falling prices, some countries are creating severe inflation, so we can be grateful for its virtual disappearance.
One of the governments providing this public service is that of Venezuela, where the currency has lost so much value that even robbers reject it. A recent carjacking victim told The New York Times his armed captors had no interest in his bolivars. They only wanted to know whether he had U.S. dollars stashed somewhere.
That sort of thing happens when annual inflation is over 150 percent. Feeding a family of five for a month cost three times more in August than it did a year before. Shortages abound; black markets are proliferating; and Venezuelans find themselves bartering goods and services to get by.
The source of the malady is plain: a socialist government that has mismanaged the economy, which is also feeling the pain of falling world prices for oil, the nation's chief export. "There's been a lack of respect and understanding of the implication of money printing and excessive money creation on the economy," former International Monetary Fund official Claudio Loser told The Wall Street Journal.
The more currency that is produced the less anyone wants it. "People are literally getting rid of money faster than the government can print it," Bank of America economist Francisco Rodriguez said.
Venezuelans find that their misery has only a little company. The yearly rate in Argentina has run above 20 percent for years and is now around 30 percent. Malawi is at 24 percent. Each day, the coins and bills their citizens carry buy less than the day before.
This may be hard for Americans to imagine, given their recent experience. On average, over the past five years, the consumer price index has risen at the minimal rate of 2 percent annually, and the inflation rate hasn't reached 4 percent since 1991. Many adults have never had the dread experience of watching prices rising rapidly across the board year after year.
Their elders, who were not so lucky, retain a fear of inflation in their bone marrow. Baby boomers were raised on lurid tales of hyperinflation in 1920s Germany, when consumers had to carry piles of money in wheelbarrows to do their normal shopping. That wasn't the worst of it. The trauma, we were taught, led to the rise of Adolf Hitler.
In the 1970s, we got our own taste of it. The U.S. inflation rate soared into double digits and stayed there. A bag of groceries that cost $20 in 1972 cost $46 in 1982. The price of gold skyrocketed from $38 per ounce to $615. Not much imagination was needed to picture a sudden run on wheelbarrows.
It didn't happen, thanks to a Federal Reserve that, in the early 1980s, slammed on the brakes by raising interest rates and curbing monetary growth. Since then, inflation has stayed tame -- to the point that these days, the debate is about whether we have enough of it. Charles Evans, president of the Federal Reserve Bank of Chicago, recently argued that the central bank shouldn't raise interest rates until "we begin to see some sustained upward movement in core inflation."
That view is at odds with the demands of those Republicans who have been predicting a nasty outbreak of inflation since at least 2009. Conservatives once had to battle to get liberals to recognize the harm done by creating too much money. But rather than celebrate their victory, they keep fighting the last war. As a result, they ignore the new danger, which takes the form of deflation and slow growth.
In September, the Bureau of Labor Statistics reported that U.S. inflation over the previous year was zero. The European Union's inflation was less than zero. Japan is in the same territory. Falling commodity prices are a threat to developing countries whose economies depend on exporting raw materials. A little inflation might be a good thing for growth.
No one would have imagined a couple of decades ago that we would learn how to stop high inflation and keep it stopped. Like communism, it can still be found in a few places. But like communism, it's no longer much of a threat.
Go buy a pound of cheese, bacon, or hamburger etc. These people don’t know in the hell they are talking about.
“That view is at odds with the demands of those Republicans who have been predicting a nasty outbreak of inflation since at least 2009.”
This guy hasn’t been to a grocery store?
They’re doing the same crap as they did in the 70s. Shrinking the product, selling you less—at the same price. Has he ever seen the size and thickness of a candy bar pre-1970s?
Since then, inflation has stayed tame — to the point that these days, the debate is about whether we have enough of it.???
If STEALING a little value form every dollar annually is good, then if we steal a little more it will be great??
Inflation is THEFT OF VALUE by DILUTION!
Where in the HELL do these IDIOTS COME FROM???
A half gallon of ice cream now contains 1.5 quarts.
A 5 pound bag of sugar now weighs 4 pounds.
A pound of bacon now weighs 12 ounces.
The stores in my area are now selling an 8 pack of 8 ounce cans of soda for the same price as a 6 pack of 12 ounce cans.
If you tell a lie often enough it becomes the Truth
Propaganda 101 and with the “education” many have gotten they “respond” like dogs...
Just how they were trained to do in school...
Teacher asks, we respond...
End of transaction
Authority over us confirmed...
Rinse and repeat...
Dilution of money value
Dilution of product size
Dilution of government accountability
Dilution of government response to its citizenry !
What a load of crap, and here’s why.
1. Containers have become smaller while prices remain the same, INFLATION, less product for the same price.
2. Fuel and food are no longer in the inflation list of items.
3. Go out and eat, the portions are smaller. When Panda Express first opened the portions were a lot larger, now they use smaller containers.
Doesn’t Townhall say they are “CONSERVATIVE”
Inflation is a transfer of wealth from the Productive (Middle Class & Small Business) to the Government, The very rich and the connected.
Deflation is a transfer of wealth in the wrong direction. (from their point of view). Which is why it is bad...
The CPI which is NOT inflation, is rejiggered every year to show a lower rate of price increase. It is said to not show actual inflation if people substitute pork for beef or cat food for Tuna so the prices of pork and cat food are substituted for those of beef and tuna. The reality is that the dollar buys less value of food even if the quantity remains unchanged. When people can afford to buy only corn and beans then corn and beans will be substituted for the rest of the menu in the CPI to show that the price of food has not increased.
I think there’s no inflation, because we’re in a depression.
With regards to hamburger, aren’t high beef prices the result of drought (hits supply) and increasing demand? Basically, market forces? (Sort of the flip side of oil: huge supply glut, global demand down ...b/c of the depression).
I don’t know all of this with any certainty. Just trying to advance the conversation here.....
Obviously these people do not grocery shop.
Oh, that’s right, they look at the index that doesn’t include food and fuel.
Yeah, that’ll be accurate. /s
Interesting site that tracks the average cost of a few common items like gas, hamburger meat, loaves of bread, etc.
According to their figures, a bag of groceries + 1 gallon of gas that cost $54 when 0bama took office now costs $76. But there’s no inflation ... move along ... nothing to see.
It didn’t happen, thanks to a Federal Reserve that, in the early 1980s, slammed on the brakes by raising interest rates and curbing monetary growth.
Inflation was put in check by Reagan’s policies of less government and more economic growth. All the Fed did was cause a nasty recession.
Yes, the cost of durable goods has not increased. But like the posters who note that the quantity of many things has decreased as the nominal price stays fixed, even durable goods are significantly poorer quality than they used to be. This is also a hidden "price increase" that economists are deliberately ignoring.
Kids used to say: "Ma, I just picked it up, and it broke." That was true because your brother or sister had already broken the thing, and cleverly put it back together so that it seemed unbroken. But now that old excuse is literally true. And having to pay for the same flashlight, mop, lawn-mower .. whatever ... twice as frequently as you used to represents an inflation rate of 100% over the fully amortized lifetime.
The scam -- much needed but still a scam -- is that we don't have the money to pay the public pension increases and Social Security COLA's mandated by law. So measuring inflation has simply been jiggered so that it appears not to exist.
In my state -- and in many others -- healthcare is the single largest source of employment. Is the author completely unaware of the out-of-control increases in medical insurance? Those increases occur because the use and cost of healthcare is rapidly increasing. But where is that on the inflation radar? It's 1/7 of the economy, increasing at 10, 15, even 20% some years. A 20% increase in the cost of healthcare should be reflected by a 2.8% uptick in inflation. WHY DONT' WE SEE THAT.
Paraphrase Stalin: When you can print your own paper, it doesn't matter who spends the money. It only matter who counts the money.
I opened two cans of beans not long ago. Same price, same weight, same size.
Can #1 was packed to the top with beans.
Can #2 was 3/4 full of beans and water the rest of the way.
I’ve also noticed that in canned tuna and many other products.
Several years ago I bought a certain brand of dish washing soap.
Then one day the IMPROVED(!) the bottle by making it easier to grasp by making the diameter of the container smaller. So, for the same price as the large bottle, I now got 1/4 less for the same price!
Yup, go buy a set of tires and tell me there is no inflation.
You are simply not taking into account the greater benefits of your new bluetooth remote. It is so, so, so much better than the old Wi-Fi versions and it costs less. So we subtract a little bit of "Cost of Living" due to this greater utility.
We, the Gods who Compute the Cost of Living Index do this many, many times for anything we like. LOL. We get to redefine that good old Basket of Goods every year. And the Yokels buy it. LOL. LOL.
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