Tuesday, March 6, 2012

What's wrong with the "inflation rate"?

How to Figure Out Your Personal Inflation Rate

To know what's really happening to your own standard of living, don't pay attention to government's statistics – just go to the grocery store or a department store and look around you.
If you’re like many Americans, you may find the recent economic news somewhat perplexing. Government reports show the economy improving and inflation under control. And yet, it may well feel as though your standard of living is eroding, and you may be shocked by prices when you go shopping. Well, there’s a reason for any disconnect between the official statistics and your own experience – and much of it has to do with the nature of inflation.
The fundamental problem is that people – economists and laypeople alike – talk about inflation as though it can be measured accurately and represented by a single number. In reality, though, inflation is a judgment call and varies enormously depending on what part of the economy is under consideration. The inflation figures that economists use when they calculate statistics can differ enormously from what you experience at the grocery store. In fact, you could say that every person has his or her own individual inflation rate.
Read more: http://business.time.com/2012/03/06/youre-already-the-victim-of-inflation/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+time%2Fbusiness+%28TIME%3A+Top+Business+Stories%29&utm_content=Google+International#ixzz1oLXvUPJK
Comment:  Note that an official inflation rate that is manipulated downwards, implicitly makes the the growth rate higher and productivity progress larger.

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