Posted on 02/01/2011 8:04:39 AM PST by SeekAndFind
A frequent question posed to those who tilt toward the inflation side of the alleged inflation/deflation debate is that if inflation is such a problem, why isn't it registering in the consumer price index? The answer to this question lies in reports of pricing pressures around the world.
As readers of the major newspapers have doubtless seen in recent months, prices - particularly commodity prices of the food and energy variety - have been increasing on the way to rising consumer price measures in places such as China, India, England, Euroland more broadly, and in the increasingly inflamed Middle East. Looking at China and India alone, despite the fact that the yuan and rupee rose 2.4% and 1.3% respectively against the dollar through November of last year, inflation rates in both countries dwarfed the relatively tame readings stateside; Chinese consumer prices up 4.4% and India's up 8.6%.
In that case, the answer to this supposed riddle of non-existent inflation despite a weak dollar is a very simple: inflation is all in how you measure it. As the Wall Street Journal reported last week, "Food accounts for 47% of the basket of products that make up India's consumer-price index and 34% of China's."
In the U.S. food, along with energy are stripped out of our CPI, and the result is a more tame inflation reading. Notably, 30 years ago when Ronald Reagan entered the White House, it was precisely the spike in food and energy - ignored today - that had Reagan and others so concerned about inflation. Times change, and governments become slick, but assuming a CPI Index in the U.S. more like those in China and India, it's not a reach to suggest that the federal government's measure of inflation would be substantially higher today.
If the above is doubted, readers need only ask themselves how much more they're paying (versus 2001) for a gallon of gasoline, for a pound of ground beef, and for other commodities whose prices tend to rise when the dollar weakens, and fall when the dollar strengthens. Depending on the makeup of a price index, the number could be high or low no matter the health of the currency.
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Mike
And Reagan got them to index the tax brackets to the CPI, which took away the tax windfall that the feds got from inflation.
So now they jigger the CPI. Who was surprised? Anybody?
Many pensions, SSI, Social Security, etc. are tied to the CPI. IMHO, if the gvt was honest about it, it would cost billions. Social Security recipients haven’t received a COLA in two years; that is a crime.
You'd think AARP would spend a few of their millions and take this to court on behalf of their members!
Prediction for Christmas 2020: Kids ask Santa for coal in their stocking. Parents warn: "You better be good, or Santa's liable to leave you nothing but an iPad."
No way! The Socialists that run AARP are firmly entrenched in nobama’s hip pocket.
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