Sunday, September 10, 2006

Core Inflation as a Tool

This Fed tactic of looking at core inflation instead of the CPI is ridiculous. (Actually, using stats to control monetary policy in the first place is ridiculous if you ask me. But I digress.)

apple_core
[Thanks to dancordell.co.uk for the photo.]

Core inflation eliminates food and gas, but it doesn't eliminate electronics and other goods and services that have bottomed out pricewise due to technological advances. Nor does it eliminate lower prices due to massive importing of cheap goods from third-world countries. Food and gas "distort" the figures higher, they say, but electronics and a cheap yuan don't "distort" the CPI lower. Hmm. I haven't done the math, but I bet you'd get closer to the CPI 4.5% inflation rate if you took both extremes out.

0 Comments:

Post a Comment

Links to this post:

Create a Link

<< Home