Tuesday, September 16, 2014

Inflation is an odd measurment

mainly because there are millions of things measured in price, none of them measured simultaneously, and few of them falling into neat categories. Hence, price theory is difficult.

Monetary inflation, sort of a meaningless statement. Are dollar/dollar going up or down? I think monetary inflation is log(one).

Consumer inflation, high or low? Depends on wages, employment and savings.

Nominal GDP is down, has been going down, and looks to go down in the future. But all that also applies to M1 Velocity, a measure of cash transaction rates.  So if consumers buy less often, do they buy more quantity per transaction? A drop in transaction rates causes a trend in inflation, probably up. We prefer the comfort of as needed purchases, I think. The price of convenience is too high. How well does the BLS calibrate this?


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