What's it called when everything costs more, but there is no inflation?

[spotbird]

My government tells me there is no inflation. That is unless you count the things needed to survive, the costs of food, energy and clothes are increasing but in an economy that is supposedly not inflationary. Is there any official explanation of how these facts can coexist, or is it just more Orwellian double-talk?

[HooptieWagon]

1. Price gouging? n/t

[Cassandra]

2. Measuring the wrong things?

Or just missing the immediate effects that rising gas prices and security concerns have on prices.

[BlueEyedSon]

3. "Anti-deflation"?

"Price Growth"?
"IGMFU"?

No wait.... "LIES"!

[spotbird]

10. "LIES"

ROFLOL! Thanks.

[RedEarth]

4. Berko(a financial columnist) has said the same thing for years

It's rather mystifying how we can pay more for life's necessities, but there is no inflation.

[bemildred]

5. It's not inflation unless wages go up.

Get it?

[BlueEyedSon]

8. LMAO!

[trotsky]

11. BINGO!

That's it! :D

[kentuck]

6. A lie??

It's inflation...

[felonious thunk]

7. There is inflation. Pretty much always has been

Inflation and economic growth are essentially intertwined. If there is economic growth, there is going to be inflation, i.e., prices rising as supply and demand of money fluctuates. Inflation becomes a problem when prices rise at a rate faster than the rate of economic growth, not keeping pace with income. So long as income is rising, prices will rise, and thus we have inflation.

The government uses the term to describe the situation where prices rise at a level that the economic growth cannot sustain.

[spotbird]

13. If I understand you correctly,

wages must be keeping up with the increasing costs for the cost increases to be noninflationary? But that isn't true, wages aren't keeping up, in fact just the opposite. What gives? Do they look at the total economic growth without regard to whether it is top heavy like never before? If that's the case, the measure of inflation is meaningless to those whose wages have stayed the same but are paying more for necessities. Warren Buffet doesn't much care how much it's going to take to gas-up the limo, but I care about how much it will take to gas up my limo.

[felonious thunk]

16. Well, you're right

In terms of what the government is concerned about, it's more trying to make sure that the value of money stays stable. If inflation increases too much, then cash is devalued and everyone's savings lose their value and we have complete economic collapse. That is the government's interest in keeping inflation low, so as to not devalue the currency.

The view you have is the ideal. That prices rise as a result of rising wages, but that's not really how it works. In reality, prices rise as a result in increases in costs of production, including labor, but also including everything else, such as gas prices related to shipping. The situation now is that prices rise, and in this labor market, wages don't. It's a bad situation, but it's not devaluing the currency.

[Loonman]

9. COLA adjustment

I think.

[ProfessorGAC]

12. Orewellian Doubletalk

There are some economists who don't include energy in the overall price increase as inflation. Then, there are others, who even redact the cost of goods and services that have gone up because of the cost of energy.

The CPI doesn't include gasoline or diesel fuel. So, when the cost of getting goods to market, or making them with more expensive electricity, etc., goes up, those increases are redacted.

This is a purists approach because they consider inflation only that in which goods and services are going up due to a supply/demand phenomenon, in which the demand outstrips the supply, forcing prices up.

It's a fairly convenient approach if what you want to do is ignore the realities of living and focus on two dimensional hypotheses regarding the economic condition.

But, with the cost of energy up >20% since 1/1/04, the upward pressure on prices is real and is happening.

The undiluted inflation is about 3%, which is higher than it's been since the early 90's. (1993, i think.)
The Professor

[spotbird]

17. It's convenient to leave the part out

that says the figures that show no inflation are meaningless to ordinary consumers who are paying more for everything they need. And people believe this?

What is the answer beyond the cost of energy? What is the real inflation rate?

[ProfessorGAC]

24. It's In My First Post

The inflation rate is based upon an agreed upon collection of goods and services, called the CPI Market Basket. It was developed quite a long time ago, and has changed many times, but in the days of development, the fraction of consumption dollars spent on gasoline and diesel was very small, and most homes were still heated with wood or coal.

When they dropped the heating materials from CPIMB, they never replaced it with something else.

Most economists and analysts use a term called Adjusted Absolute Inflation (AAI), which includes the impact of energy on the overall costs of goods and services as well as direct purchase of energy by the consumer. But, the values reported by Commerce, Treasury, and the CBO are always just the CPI based upon the currently agreed upon Market Basket.
The Professor

[Strelnikov_]

19. Tenants of AmCap

War Is Peace
Ignorance Is Strength
Greed Is Good

[MaineDem]

14. Mythology

Too bad Bullfinch is dead.

[JayS]

15. Stagflation?

http://www.internetional.se/toft/stagflation.htm


Begin Quote:
Stagflation: a term coined by economists in the 1970s to describe the previously unprecedented combination of slow economic growth and rising prices.

"Many of today's investors were still in diapers during the great stagflation of the 1970s. Those who weren't will never forget the darkest period in modern financial market history."

Stephen Roach Morgan Stanley Dean Witter


There was an economic nightmare during the 1970s that may just be coming back to cause sleepless nights for American investors: stagflation. Stagflation is the worst of both worlds: inflation and recession. It is characterized by an economy that is contracting while prices continue to rise.
End Quote:

[el_gato]

18. Stagflation

And we will see a hell of a lot of it due to
dwindling petroleum supplies.

The cost of production goes up so prices go up.

[MallRat]

20. It's called GASOLINE AT $2 A GALLON.

It's like an invisible surcharge on everything... and things like gas and food aren't counted in the CPI.

-MR

[Sparkly]

21. You beat me to it

[Hotler]

22. It's called greed,

plain and simple. With 200 billionaires in this country, it cost a lot to keep them satisfied.

[randr]

23. Grand Theft