With Deflation Possibly Near, This Economist Is All Abuzz

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.

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.
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
Top Bottom