11/19/2008

Obviously the CPI isn't good at dealing with sudden large changes in the price of one heavily weighted product

Just as the increased price of gas was overweighted in the increases in the CPI, so to is it overweighted in the drop. The swings in the price level are much more stable and it indicates to me the money supply hasn't been going up as much as some people worried. Note this:

Over the past 12 months, consumer prices have risen by 3.7 percent, substantially below the 17-year high of a 12-month price increase of 5.6 percent set this summer. Core prices are up 2.2 percent over the past 12 months. . . .


The misery index right now is 10.2.

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Blogger cory said...

The swings in the price level are much more stable and it indicates to me the money supply hasn't been going up as much as some people worried.
The Fed has been playing "shifting sands" with the money supply. They are no longer able to do that, as they have increased the monetary base by 77% in the past 9 weeks:

http://research.stlouisfed.org/fred2/series/WSBASE?cid=124

You'll see the net effects of this in the 2nd half of 2009.

11/21/2008 5:03 PM  

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