Why must it be difficult? Simply put, inflation is the rate of increase of the price of goods and services during a period of time. It doesn't make any difference why the prices go up because it's simple math...
Let me give you an example. A certain small island becomes a very desirable place to live, people start moving there. Land prices and rents go up. Businesses raise prices to cover their expenses. This is not inflation. Because if you go to another part of the country, prices will still be what they were before.
Each location has a CPI or cost-of-living index and will vary state to state, city to city, island to island. At the federal level they have no choice but to look at weighted averages for the nation. Obviously a SS recipient living in Santa Barbara is not going to fare as well as one living in Liberal, KS when both receive the identical CPI increase...or not. It depends on how the CPI is to be used and how it effects people located in different areas...
It is possible for cost of living to go up, that does not necessarily mean there was inflation. This is why it can be a little complicated. If prices go up across the board, we have to look to see whether costs actually went up, or whether the value of the currency has become less. Trying to definitively define how much the currency is "worth", and then trying to compare that between different years, can be problematic. I'm not saying there has not been inflation, or that we should not be paying attention to it, but we do need to understand what it really is. There might be things people are blaming on inflation that are actually cost increases. The "basket of consumer goods" model may not work so well.
Cost increases are what inflation is made of. If costs go up, inflation has gone up. If I buy a potato for £1.00 on Tuesday and the cost goes up to £2.00 on Wednesday, that is a 100% daily rate of inflation. MY £1.00 used to be worth 1 potato, but now it is only worth 1/2 a potato. The monetary value of a potato has increased and the redeemable value of my £ has decreased. For myself I measure inflation in beer. A beer that cost £1.25 in 1990 now costs £5 in the same bar. Manufactured goods have become cheaper. Most notably cars. the UK imposed laws banning price fixing of cars here. Car manufacturers all charged much more for the English market than in any other country. The same is still true in other fields. Manufactured goods are cheaper. My clothes cost less. My computers have not got any cheaper but they have got much more powerful. For inflation proofing, buy physical goods. Antiques. Houses. Gold bars. Vintage cars. Art. Stocks and shares. These things tend to hold their value in the way that a £ does not. For almost all of my life my government has pursued a policy of constant inflation. Making it stupid to leave your money in cash or a saving account. Inflation benefits borrowers and those on protected incomes at the expense of savers, while deflation benefits savers and people on low incomes. Which is best for you depends. My sister works for the state so her wages are inflation adjusted. I am self employed, mine are not. She has a mortgage, I do not. Every year inflation reduces the price of her mortgage in comparison to the wages she earns. Every year the price of my rent goes up but the redeemable value of my wages goes down.
Whenever costs go up the value of the dollar falls...if something costs $1.00 today and we have 10% inflation at the end of this inflationary period that item will cost $1.10. The dollar no longer buys as much as it did before. Costs can go up and down for many different reasons, but no matter why, if the prices to the consumer are higher...this is inflation. At the federal level, it's just math...an average across the country which will not accurately represent every unique location...
Actually, this is quite literally true - except that the corporatists work through both parties, not just the GOP. The corporatists preach limited government, but they mean limited government for you, not them. They are actively using the powers of government to depress wages, and have been doing so for the many decades. This is gradualist process, of course, so that you fail to recognize what is going on. Here are the channels through which corporatism achieves its aims: 1) Unfettered free trade (this originates as part of Libertarian Party Platform, and later emigrates into the mainstream of neo-liberal practice) 2) Free movement of labor (same as above) 3) Free movement of capital. This allows companies to export jobs to low wage countries. 4) 'Right to Work' laws 5) Automation. Not bad in itself, just the way it is set up. Under the current tax/legal setup , automation eliminates job while channeling the resulting savings away from labor to capital. 6) Management of competition. Sometimes called 'mercantilism,' powerful corporations are able to capture market share through government controls. This is endemic in the telecom, media, energy, and defense industries. Groups like ALEC are expressly formed to mediate corporate control over government. 7) Divide and Conquer mentality. Mass media and propaganda are employed to turn the working class against itself. Memes are created, propagated, and repeated on a non-stop basis. Liberal/conservative. Left/right. Black/white. Men vs women. The idea is to make you angry at somebody who is basically in the same position you are in, while the guys pulling the strings laugh all the way to the bank. Can you imagine the horselaughs generated by BLM activism or Biker for Trump pounding on clueless protesters? You're doing their work for them, congratulations! Another little fact you should be aware of. Markets are not magic, nor were they created by God. Markets were created by humans, for human purposes. They are rule-based entities, and those who write the rules reap the profits. House Rules guarantee a risk-free return, and it's why the casino always wins, in the long run,
Inflation occurs world wide, but just comparing the effect between the U.S. and where I live in Asia the result is that the difference between the cost of labour in the U.S. and that in developing world nations has grown much larger which in turn has attracted businesses to relocate to where they can increase their profits, which is a primary purpose for which they are created and not simply to employ more people. Who benefits most from inflation; the rich, the middle class, the poor, or government? It affects us all, some beneficially while others detrimentally.
Inflation can be defined two different ways; there is monetary inflation, and price inflation. And to make matters more complicated, the line between the two is not always a clear one. For example, maybe the "money supply" increases but the currency in circulation remains the same. This could happen in an inflationary bubble with rising asset prices and people taking out more loans. In this case, a form of monetary inflation occurs (because there is more money in bank accounts) but it is actually a form of price inflation, because people have more wealth (or think they have more wealth) to bid up the price.
Sorry but you give people and corporations far too much credit...above are just conspiracy theories...
Above not true...outsourcing and/or offshore facilities is seldom about 'increasing profits'. You forget that ALL companies are in competition with someone, all competing for finite consumer dollars. Reducing business costs allows companies to be more competitive and to keep the doors open. If a business can grow their profits, this means a healthier company, more growth potential, more jobs, more R&D, etc. so profits are a good thing...why demonize them? Average net profits in the US is something like 5-7%... - - - Updated - - - But you're talking fringe stuff here when in mainstream America when the prices to consumers increases it's inflation...
It was not my intent to demonize companies, and I probably should have included "reduce their costs in order to remain or become more competitive" And I agree totally, profits are a very good thing.
Inflation, or increasing the money supply, results in devaluing the money which in turn is compensated by price increases and higher wage demands. From the worker/consumer point of view, monetary inflation (the cause) and price inflation (the effect) simply result in a higher cost of living which is inflation in terms of combining a cause and its effect.
Not really, unless there is more stuff. The thing that should theoretically affect cost of living is more people. Supply is way manipulated by it's availability. Eg: nobody wanted a smart phone in 2005. Population/number of monies is truthfully the only indicator tied to fiat currency.
Inflation, which would be an increase of the fiat money supply, can remain flat while food prices as one example, can rise dramatically as the result of nature, drought for example reducing crop yield resulting in the cost of living increasing or reducing the consumption of wants in order to acquire ones needs.
Or inflation can be a lack of stuff to buy. Where is there quality? When the financial markets are sitting on nominally record capitals, they don't have anything to buy. But really they are paid fees to hold because our whole retirement system is integrated into 401k's. 401k's is the system we put into place to conquer the non-viability of old people in our economy. Not the best, but also not dead. Food is an interesting goto to me. Not just because insects are an ubiquitous food source. But because we have developed a society without insects as a food source, which is contradictory to human and animal history. Insects have always been a food source, even today. But we have some weird immoral reaction that they cannot be. It's weird, especially when you're discussing pricing of goods.
As JoakimFlorence correctly pointed out in post #34 of this thread, there is monetary inflation and price inflation. Monetary inflation is a sustained increase in a countries money supply. Price inflation can occur as the result of monetary inflation which is how the CPI is calculated, or when demand greatly exceeds the supply of something allowing the seller to raise the price to what consumers will pay. True, but another time, another thread.
I believe you have not identified the causal mechanisms correctly. A modest amount of inflation (2%/year or less) is not a problem as long as wages keep pace. The important factor is the disconnect between growth in productivity and growth in wages that began in the early seventies. Real wages have not kept pace. Adopting an anti-inflation monetary stance wouldn't help this at all.
No country's have suffered more from globalization than the United States, UK, Canada, and other previously domestic-powered economies. I recall a story about Harley Davidson (you don't have to like them, hate them, it's just an example...). Japan was producing motorcycles that looked, drove, and had the same appeal as Harley Davidson motorcycles. These motorcycles, however, cost about 50% the cost of a Harley (in some cases less). This almost put Harley Davidson out of business (I believe they had less than 2 weeks of reserve funds available at its peak decline), except a few politicians got involved and decided to pass an import tax that would increase the cost of Japanese motorcycles. The revenue was then used to subsidize Harley's cost. In the end, a medium was attained. Harleys cost a bit less, Japanese bikes cost a bit more, Harley gets to keep on employing and earning. If the Japs want to pay their workers 50% of what America paid theirs, fine, by all means, help out the American consumer... American businesses and corporations wont pay the price though. NAFTA and the Pacific Free Trade agreement did away with tariffs, export taxes, import taxes, and the likes. Not only that, but the United States remains one of the only remaining industrialized and developed nations to tax corporations on profits earned outside of the USA. An iPhone sold oversees is not only taxed by the country it was sold in, but is taxed again when the money returns to the USA (50% is it?). Samsung, the iPhone's primary competitor pays an effective tax rate of about 9%. Apple pays over 60%. Apple, as a result, will not bring the money back to the US, to benefit the US. PGE, IBM, and many other companies will not either. Why would they? It's an instantaneous 45-50% loss! One might argue (in the short term) that the above 2 facts would, if anything, lead to deflation. If Apple introduced more money into the US market, then this would cause inflation, so keep the money overseas right? Products shipped to the US that are cheaper and comparable to US-Made goods are great for the consumer, bring it on right? The less money that is in the US, or the more money that leaves the US that is not returned to the US in the form of profits means banks have less money to lend (that money usually sits in banks), and corporations have less domestic dollars to invest (Apple must borrow money in the US even though it has plenty of money overseas, when it wants to do something "big"). The result is that the Federal Reserve loans money to banks and corporations. In, invited, is the Devil. Reduced declared domestic revenue means the US Government has nothing to tax, and so must also nock on the Federal Reserve's door. What do you get when the government, corporations, large businesses, and other domestic "global market participants" borrowing money from the Fed? An incredibly high demand for very low interest rates. Do you know what happens when the Federal Reserve has very low interest rates? Corporations, large businesses, and other entities borrow more. Not only that, but they get stupider with the money, and borrow more. Housing prices increase. Utility bills increase. Taxes increase. Subsidies begin to disappear. Do 50 and older see it as bad? Do executives and large business interest-holders see it as bad? No. The only ones currently seeing the fallout of the current patch economic system is new low to mid income consumers. The ones that are paying twice as much (adjusting for inflation) as their parent's. The ones that are paying twice as much for houses (adjusted for inflation) as their parents. The ones who's bill-to-income ratio is twice as The Devil has Come. It was foreseen. "I sincerely believe... that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." --Thomas Jefferson to John Taylor, 1816. ME 15:23 It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society the farmers, mechanics, and laborers who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. Veto Message (Andrew Jackson) Regarding the Bank of the United States [2] (10 July 1832).
I checked it out once. I made $1.58/hr as a kid and new Corvette was $6000. Today wages and prices are up about the same, although lately wages have been lagging due to the new international competition.
I am not sure if the increase in prices over that time is due to inflation. It is certainly not due to the cost of labor as you pointed out. It is certainly not due to lower productivity creating a lack of goods to buy. I would argue it might be due to the price of commodities or technology needed to run a modern company or even shareholder lust for a return, it might even be due to lavish spending by corporations hiding income as an expense. But inflation? Here is the classical definition of inflation: http://www.investopedia.com/terms/i/inflation.asp What is 'Inflation' Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly. Now on the face of it, it looks like any rise in prices due to the lack of purchasing power of a currency is inflation. That might be correct. But does this mean the US dollar is weak? The fact that we buy so much stuff from abroad might affect prices but aren't we supposed to be enjoying lower costs for imports rather than buying more expensive goods from domestic producers? I thought if we shipped our jobs overseas, prices would drop. Well, they have dropped for all sorts of goods and inflation statistics do not capture the fact that today you can buy a high dev 50 inch TV with wifi for 300 bucks! In 1988 I bought a 40 inch Mitsubishi TV for 1000 bucks that was top of the line then, it sucks now. What about your Iphone? That thing is more powerful than most mini-computers in the 90s and it costs 600 bucks. No, I think inflation as we measure it is outdated, it is a weird statistic that requires someone intimately familiar with the models to even understand it. At the end of the day, we really have no inflation driven by a banks actions, it simply does not exist in America. It might exist in another nation like Argentina or Zimbabwe but you cannot compare us to them.
the Fed prints money so only it can cause inflation. If they double the money supply tomorrow prices double tomorrow, if they cut money supply in half tomorrow prices are cut in half tomorrow. Makes sense?
You're correct that monetary inflation does eventually result in price inflation, but not always so quickly. MB 1918-01-01 $4.874B MB 1929-10-01 $6.122B MB 1939-12-01 $14.523B MB 1949-12-01 $33.324B MB 1959-12-01 $40.087B MB 1969-12-01 $63.244B MB 1979-12-01 $133.816B MB 1989-12-01 $281.878B MB 1999-12-01 $636.875B MB 2008/09/10 $874,822B MB 2009-12-01 $2045.510B MB 2016-03-01 $3910.702B MB 2016/04/27 $3,895,073B The MB has inflated significantly since 1918, and even more so since 2008. Price inflation since 2008 is claimed to have risen only 10.6%, and currently less than 1% each of the last 2 years but depending on individual needs and wants price inflation can vary greatly.
not sure what that means since inflation refers to the general price level for all people, not separate individuals.
Monetary inflation results in devaluation of our currency, and while our fiat currency might devalue 3% the price of some products and/or services may rise 3% others might rise more and still others might rise less and in rare instances some might even decrease. Price inflation occurs as a result of not only monetary inflation, but other variables as well. The Federal government tends to look at defined needs, which can vary greatly between States, locations, individuals, based on the average or median value and use such numbers to define as being inequalities between individuals that government needs to resolve.
