Is inflation really measuring inflation?

Sir, over the years, the Central Banks have grown a lot more independent, which is good, as long as it does not diminish their accountability and allow them to focus blindly on goals of their own choosing, monitor the results, and live forever after happy in a big club of mutual admirers.

Inflation is the number one of those monsters that central bankers proudly show off as having been tamed but sometimes we must have our lingering doubts about whether it really is so. In an economy where whatever few savings we can set aside buy fewer and fewer assets like houses, it is sometimes hard to accept that there is no inflation, no matter how much central bankers tells us so. 

As inflation is just the result of the formula, or the basket, or the sampling techniques that we use for measuring it and is therefore a truly incestuous economic concept, there might be very good reasons for revisiting the whole issue of what, how, and why we measure it, even if this means some new hard work load for our overburdened central bankers. With the world going through major changes, inflation, as we think we know it, might very well have degenerated into something quite different from what we initially had in mind when we first thought about how to measure it. 

Meanwhile just to put some check on their egos, every time I see a central banker, I urge him to take a shopping trip to the closest IKEA so as to see who really should get the credit for controlling inflation as we currently know it.

Extracted from my Noise and Voice 2006

And on the same theme in Financial Times May 2006

And here, warning the Financial Times in August 2020, that the inflation had already returned. 

November 2021: To help moor (my) inflationary expectations, get rid of what facilitates it.

PS. The Consumer Price Index is calculated based on actual consumptions. But the real inflation that consumers register, is that of the products and services they no longer can afford to buy as prices have gone up too much for their diminished budgets. What would be the inflation rate on the consumer basket of e.g., two years ago?

PS. #AI #OpenAI #ChatGPT: “If you had access to real time data provided by a great number of outlets and other sources, would you be able to provide reasonable inflation figures estimates without us having to incur in current time lags?”

 

The truth, in theory and in practice, is that everybody's inflation, might be nobody's inflation.