Do You See Deflation?

 Bernanke, Deflation, Inflation  Tagged with: , , ,
Aug 172010
 

The inflation-deflation debate continues. James Quinn, however, questions how real deflation is.

WHERE’S THE DEFLATION BENNIE?

The data doesn’t format well when I copy it from the BLS website. Here is a link to the PDF version:

http://www.bls.gov/news.release/pdf/cpi.pdf

The government keeps telling you about the dangers of deflation. The July CPI calculates out to an annual rate of 3.6%. Doesn’t sound like deflation to me. The year over year increase of 1.2% is essentially a fraud. The Consumer Price Index is supposed to measure what it costs a person to live their life. Do you buy and sell your house on a monthly basis? NO. The government CPI number is weighted 42% to the value of your home. What a crock.

If you back out the part of the CPI related to home price descrease, your true costs have gone up by 2.4% year over year. Do you use any of these things on a daily basis?

  • Fuel oil for your house up 13.5% YOY
  • Water, sewer and trash collection up 6.0% YOY
  • Gasoline up 7.4% YOY
  • Used cars and trucks up 17.o% YOY due to Cash for Clunkers
  • Public transportation up 7.7% YOY
  • Medical care up 3.2% YOY
  • Tuition for school up 4.8% YOY
  • Tobacco up 7.4% YOY

It sure looks like the things that Average Americans pay for every day are actually soaring in price. Does the 1.2% annual rate seem right to you, or does rates in excess of 5% seem more like it?

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