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Old 01-07-2010, 12:23 PM
 
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hi,
ever since i remember, there's always been the talk of the 3% inflation per year....well, i would like to understand that a bit better because i don't see how that works....
so, inflation is a general rise in the price of goods and services........

although the price of milk has gone up from 2 bucks to 5 bucks since year 2000 (at least as i remember it), i still buy tomatos for 99 cents a pound, bicycle still for a couple of hundred, TVs for a whole lot "LESS" than before, same with computers and pretty much everything else electronic (right?), so please help me understand how we can just say that there is X% inflation when things more or less seem to be at the same level? some things are up by a bit, lots of other things down by a whooole lot.

just trying to understand.
thanks in advance.
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Old 01-07-2010, 12:38 PM
 
Location: Saint Louis, MO
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Inflation is usually measured in terms of Consumer Price Index (CPI), which is based on a "basket" of goods.

More info: Is the Consumer Price Index (CPI) the best measure of inflation?
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Old 01-07-2010, 12:50 PM
 
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Quote:
Originally Posted by billiken View Post
Inflation is usually measured in terms of Consumer Price Index (CPI), which is based on a "basket" of goods.

More info: Is the Consumer Price Index (CPI) the best measure of inflation?
yes, but how does that affect the typical person?
the perception is that everything goes up 3% year over year....
it just doesn't seem like that's true.
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Old 01-07-2010, 01:01 PM
 
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I put this in the topic on currency but it is appropriate here too. It doesn't have much to do with the cost of the goods, it has everything to do with the constant devaluation of the federal reserve notes that we use.

Economics 101: Without the Bull****
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Old 01-07-2010, 01:10 PM
 
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You are really talking about "Consumer Price Index" when you talk about milk and other "basket of goods" type measures: Basket Of Goods

Economists talk about lots of different elements that drive inflation, What Is Inflation - Your Inflation Questions Answered

Monetary policy is mostly designed to deal with cost-push inflation Definition or to prevent excessive Demand–pull inflation - Wikipedia, the free encyclopedia

Pretty amazing how things can get out of whack: Historical Inflation data from 1914 to the present
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Old 01-08-2010, 04:25 AM
 
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Quote:
Originally Posted by chet everett View Post
...

Pretty amazing how things can get out of whack: Historical Inflation data from 1914 to the present
Not really. That is the same year they created the Federal Reserve and the Federal Income Tax.
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Old 01-08-2010, 06:34 AM
 
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Quote:
Originally Posted by Kleenex View Post
yes, but how does that affect the typical person?
the perception is that everything goes up 3% year over year....
it just doesn't seem like that's true.
it isn't.

first, not everything goes up equally. for example, inflation in the U.S. might make Australian-mined metals very expensive for us, while American-grown corn stays the same price. Those raw material costs affect the costs of what you buy at the store. Technology (TV's and computers) are a little different- they tend to become either cheaper or better every year. When most people talk about "inflation" they are usually talking about "CPI", which is a group of statistics compiled by the government that attempt to measure a "basket of goods", and turn the concept of "inflation" into one simple number.

second - prices don't always go up. 3% inflation every year might be a good target, if our government had complete control over the situation. In reality they don't have complete control, so you get years of high inflation, or of persistent deflation.

Last edited by le roi; 01-08-2010 at 06:48 AM..
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Old 01-08-2010, 07:23 AM
 
Location: San Diego California
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The subject of inflation is not simple. Some things go down in price due to their production being moved offshore where labor is cheaper as in TV's and tomatoes. Of course that means the loss of Jobs here. Inflation is just another word for devaluation of the dollar. Our money is continually devalued due to money growth. This is how bankers leverage their earnings. When money growth exceeds real production in goods and services you have inflation. It is a process designed to benefit bankers and to encourage debt in consumers. So long as we allow bankers to control our money we will have dollar devaluation (inflation). What is really disturbing is that now we are in a situation where the other countries are less willing to accept dollars for their products and resources, just at a time when we are more and more dependent on them. If it were not for the fact that we are their biggest customers, they would be charging us much more for what we need. I feel in the future, due to demand worldwide, that is exactly what is going to happen
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Old 01-08-2010, 08:36 AM
 
454 posts, read 1,243,783 times
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Quote:
Originally Posted by jimhcom View Post
The subject of inflation is not simple. Some things go down in price due to their production being moved offshore where labor is cheaper as in TV's and tomatoes. Of course that means the loss of Jobs here. Inflation is just another word for devaluation of the dollar....

right.....that's the perception.....
that's why they say that you need to save 1.7 (or whatever) million dollars by retirement for it to feel like 1 million (or whatever) today....

well, this, to me means that the 1.7 million 30 years from now, will do what 1 million does 'today'. and i'm wondering if that's 'actually' true. as i've said, and as many here have said, i may be buying milk for 50 bucks a gallon in 30 years (or whatever), but i also may be able to buy a computer for 200 bucks. so, my everyday costs, may more or less be what they are today on average....

that's how it seems when i do a comparison from 10 years ago...
obviously i don't know as much as you guys do about Economics and i'm sure there are a million things i'm not taking into consideration...but this is just how it seems to me as an average joe.
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Old 01-08-2010, 10:38 AM
 
Location: San Diego California
6,797 posts, read 6,317,656 times
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Quote:
Originally Posted by Kleenex View Post
right.....that's the perception.....
that's why they say that you need to save 1.7 (or whatever) million dollars by retirement for it to feel like 1 million (or whatever) today....

well, this, to me means that the 1.7 million 30 years from now, will do what 1 million does 'today'. and i'm wondering if that's 'actually' true. as i've said, and as many here have said, i may be buying milk for 50 bucks a gallon in 30 years (or whatever), but i also may be able to buy a computer for 200 bucks. so, my everyday costs, may more or less be what they are today on average....

that's how it seems when i do a comparison from 10 years ago...
obviously i don't know as much as you guys do about Economics and i'm sure there are a million things i'm not taking into consideration...but this is just how it seems to me as an average joe.
Believe me, bankers and politicians work very hard at making this subject as confusing as they can. If people really understood it, they would know how badly they are getting screwed and put an end to it. If the truth was really known, there would be bankers and politicians hanging from trees.
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