Common Sense ~> ‘That Doesn’t Feel Like $150 Worth of Groceries’

Why inflation is worse than you think.

Samuel Gregg6 hr ago389195
Shoppers in Cambridge, Mass., in 1977. (Barbara Alper via Getty Images)

In 2011, the last time inflation was on the rise, the then-president of the New York Federal Reserve, William Dudley, ventured into a working-class neighborhood in Queens, New York, to give a speech explaining why inflation wasn’t a big deal. Finding that he wasn’t making an impact, Dudley famously picked up an iPad 2 and told his audience, “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful.”

“I can’t eat an iPad!” someone in the audience shouted back.

I was reminded of this story recently while standing in the checkout line of my local grocery store. An elderly neighbor standing in front of me saw the total price of her purchases flash up on the screen. For a moment, her eyes registered shock. Then I heard her mutter, “That sure doesn’t feel like $150 worth of groceries.”

What my neighbor was sensing was the general increase in the price of goods and services and an associated decline in her money’s purchasing power. That’s the essence of inflation. 

I didn’t have the heart to tell her that a bag of groceries isn’t included in what’s called the “core inflation” measurement. That’s because energy and food prices are subject to sudden variations caused by events like crop failures or war. Fluctuations in the price of a carton of milk are not thought to tell us much about long-term inflationary trends. 

The problem is people still have to spend their hard-earned dollars on food and gas—and there’s no reason to assume that spiking inflation doesn’t affect that.

Making matters worse is the fact that the Bureau of Labor Statistics and the Federal Reserve, which measure inflation, have long relied on measurements that make it appear as if inflation is not as bad as it really is.

Case in point: your house. Your house isn’t considered a consumable item, because (usually) when you live in a house you don’t use it up, or expend it. So, it’s excluded from the list of consumables in the government’s inflation indices. 

Yet the price of your house—and everyone else’s house—is affected by a decline in your money’s purchasing power. The government tries to correct for this by polling homeowners every six months about how much they think their homes would rent for. But homeowners often don’t know this, and only some of the responses are factored into official inflation estimates.

The bottom line: a significant gap between the inflation that we experience and the government’s inflation numbers. 

About michael burgwin

A child of the peace and antiWar movements, a Truther with self-diagnosed Opposition Defiance Disorder, formerly politically liberal tho now politically marooned, and Post-Doomer, on any issue, I trend to the conspiracy side, sort through the absurd, fantastical and insane, until I find firm ground usually located just the other side of the censorship firewall of propaganda and orthodoxy, dogma, and other either / or thinking.
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