In the last fourteen years, doing this commentary, I have written about inflation at least a dozen times. But this time, I’m not talking about the theory of inflation but the reality of inflation. We all know that prices are going up on various goods and services and suspect they will continue to rise in the future.
The current inflation numbers are the highest they have been in thirty years. But if you remember my past commentaries on inflation, I documented that the current method for estimating the consumer price index involves using a different basket of goods than what was used in the past.
If we used the same metric that was used in 1980, we would have to conclude that inflation is higher than it has been in forty years. And if you rightly assume that the technological advances in the last forty years should be deflationary, then you would conclude we have the highest inflation in our lifetimes.
Faced with rising prices, we are first told that rising prices were just a result of supply-chain problems (partially true) and then that inflation was real but transitory. The latest claim is the “inflation is good for you.” Type in those words or similar phrases, like “inflation is good for the economy,” and you will see the latest attempt to make us feel good about the economy.
Of course, inflation is good for a federal government awash in national debt and good for people in debt. You can pay back debts with devalued dollars. Inflation is bad if you are concerned about income inequality. Rich people can invest in appreciating assets like art, stock, and real estate. People on fixed income and government payments are often hurt the most.
In fact, most Americans are hurt because wages never rise as fast as inflation, especially when you realize the inflation numbers are inaccurate.