With Deflation Possibly Near, This Economist Is All Abuzz

[Gone4Good]

The problem is, this isn't real "deflation" -- it's "substitution" which the government uses to claim deflation (or less inflation).

According to the BLS:

The Consumer Price Program (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. . . . The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought.

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CPI isn't static (good thing too, because it wouldn't be a good gauge of anything if it still included prices of buggy whips and coal hods). If consumers consistently choose cheaper products, than the cost of living declines. I'm not sure what value CPI would be if it measured the prices of things people don't actually buy. Or things that people bought some time ago, but no longer do.

And besides, it works both ways. I don't recall anyone complaining that CPI overstated inflation because it included more cups of designer coffee and fewer cups of Nescafe.

 

[Dennis]

Well I'm watching this Deflation issue as well, as to when to be buying TIPS.. It won't be a long run with Deflation so have to be ready to act quickly.. me thinks

 

[TromboneAl]

Actually, CPI-U was up 0.4% in January. It will be interesting to see February's number (released this Wednesday).

.4% rise according to this article:

Stock Market Update, IPO profiles, Earnings Call Transcripts, Economic news, company news, Mutual funds profile,Earnings News, Mutual Fund Managers,Industry sectors, Oil and Natural Gas stocks - 123Jump

 

[ziggy29]

Well I'm watching this Deflation issue as well, as to when to be buying TIPS.. It won't be a long run with Deflation so have to be ready to act quickly.. me thinks

I think the time to buy TIPS was about 7 hours ago...

 

[FIRE'd@51]

.4% rise according to this article:

Stock Market Update, IPO profiles, Earnings Call Transcripts, Economic news, company news, Mutual funds profile,Earnings News, Mutual Fund Managers,Industry sectors, Oil and Natural Gas stocks - 123Jump

Yep, that's the seasonally adjusted number. Headline CPI-U was actually up 0.5%, and that's what affects TIPS, and, for the more venturesome among us, ISM/OSM.