real inflation

There is precision, and there is accuracy. It is unwise to attain more precision than accuracy, for one is apt to fool oneself, and worse still to attain precision at the cost of accuracy.

You cannot measure inflation on goods that are changing, without making questionable subjective judgements. Goods that are not changing are stuff like food and fuel. An accurate measure of inflation would not include goods that apt to change, which measure would understate the difficult to define or measure improvement of standard living, but accurately state the cost of living.

So how is inflation going on stuff that we can measure accurately?

It is starting to look a lot like hyperinflation:
CNBC tells us

Just in April—the most recent month for which data is available—grapes went up nearly 30 percent, cabbage jumped about 17 percent and orange juice surged more than 5 percent.
…
The government’s main gauge of inflation, the Consumer Price Index, is increasing at a 3.6 percent annualized rate, a higher reading but not enough to provoke any policy action to control prices.

But a look at prices compiled by the Bureau of Labor Statistics tells a different story.

The BLS numbers show a climate of continually rising prices across a wide swath of food categories—a tally of 76 items ranging from ground beef to soda to dairy products.
…
Measuring the past month’s performance, the BLS found prices gained on 45 of the items it monitors. But over the past year the trend is much stronger, with 66 of the 76 items higher in price, some by staggering numbers.

Coffee, for instance, is up 40 percent. Celery is 28 percent higher while butter prices rose 26.4 percent. Rounding out the top five are bacon, at 23.5 percent, and cabbage, at 23.3 percent.

April 2011, meanwhile, was a bad month for fruit prices as well. Joining grapes as big gainers in the fruit aisle was grapefruit, which rose 15 percent. While cabbage led the vegetables, broccoli rose 2.5 percent in the month and about 12 percent for the past year. Smoked ham was 7 percent higher and potatoes jumped 6.1 percent.

Federal Reserve Chairman Ben Bernanke has used the term “transitory” to address the surge in food and energy costs, reasoning that temporary factors such as weather and $4 a gallon gas were pressuring prices.

He might be right, but it looks to me the other way around – that food and fuel are showing the real rate of inflation, while “core inflation” shows how easy it is to fool yourself with sufficiently overcomplicated statistics. We shall know in a year or so.

His faith that food and fuel prices are temporary appears to me to based on faith in Keynesianism, which is in turn based on faith in progressivism.  He would be better off having faith in the great Cthulhu, which unlike Keynesianism can never be disproved.

I shall revisit this post in 2012 October.