Tuesday, February 19, 2008

What Inflation? -- Conclusion

The four posts below show the following:

1.) There have been very large price spikes in a variety of energy and food commodities. These are not small increases. In addition, the breadth of the increases nullifies the argument that the price increases are the result of a disruption in a particular market.

2.) One of our largest trading partners [thanks to an anonymous poster for pointing that out] has high and accelerating inflation.

3.) The US dollar -- which is the base currency for most commodities -- has been dropping in value for the last two years. In addition, the zero maturity money supply has been increasing at a high year over year rate for the last year and that rate of increase is accelerating.

4.) The US government's methodology for computing CPI has changed over the last 25+ years and the that methodology may be understating the official inflation rate. I can't speak to the validity of this argument. However, considering the price increases I am seeing at the personal level I find this argument at worst worth discussion.

Conclusion: inflation is a problem.