I am sorry to report that the biggest "industry," by which I mean the most profitable business, in America is breeding dopes, i . e., brainwashing people from birth onwards to serve the interests of a tiny min ority, e.g., 0.01% . Financial markets are a mechanism to that end. I am fully aware of the fact that this view is not very popular.
So you are more looking north of the 3% mark. Second mistake is assuming 3% as a cutoff, even 2% is brutal. If you take all your working years (say 45-50) and compound those 2% over time the avg. salary would need to rise much faster than it ever did. So CPI is quite high and breaking peoples necks regularly. Try again.
CPI is useless and heavily manipulated by government.
you should be asking what is your "personal inflation"?
that is how much more are you paying for things you use in your daily life?
that is the only inflation that matters.
my personal inflation has gone crazy the last decade. phone bill doubled. electrical bill almost doubled. gas prices about doubled. basic foods almost doubled. many of the basic items i buy regularly has gone up a lot in price.
fuck CPI. fuck the government's bullshit numbers.
i find the big mac index is a more realistic measure of my personal inflation than the bullshit CPI
Never mind Big Macs and Computers. That's not where the majority of income for median America goes.
It goes to Health Care, Rent/Housing, Grocery Store Food, and Education.
I would much rather make $100 extra a month than pay $600 instead of $1200 for a new computer, since I only buy a new computer every 2-3 years, whereas I pay rent, my wife's student loans, groceries, etc. every month.
I can delay a computer purchase, but I can't put off the mortgage payment or paying the landlord. I can skip the big mac and have a burger at home, but I can't delay an ER visit for my coughing child.
When it comes to the "Iron Costs" of living, the essentials, there has been a great deal of inflation, and it's no accident that these costs are partially or wholly discounted by the CPI, while consumer goods are overweighted.
Long-term inflation is about an annual 3.5% to 4.5%. When checking, savings, and money market account yield 0% interest, this means a 4% tax on all your savings each year. And all that tax revenue goes to bankers, not to providing government services or helping the poor. Taxing savings also forces people to pay for large purchases like cars, college, and houses with debt rather than savings, and this has many evil effects.
Furthermore, inflation causes real wages and real social security benefits to drop about 4% a year. How often do you get a raise a work? You'd have to get a 4% raise every year just to earn the same real money before taxes every year. Taking taxation into consideration, you need to get a 5% to 5.5% raise each year just to maintain the same after tax income.
Inflation is a tax on savers, wage earners, and the retired who rely on social security, pensions, and retirement plans. And this tax does not benefit society. All tax revenue goes to greedy ass financial parasites so they can buy a service to transport their yachts to Bermuda so they don't have to go through the horror of sailing their yachts from NYC to Bermuda. So enjoy paying that inflation tax.
Say a modest television costs $350 if you were to buy one today. Well an economist working for the government looks at that television and says, "Because it is a flat screen LCD electricity saver and not one of the old CRT ones you are getting more for your money." Which is somewhat true, but I cannot go to Best Buy and pick up a brand new CRT TV, and thus this measurement is way out of whack.
They say your dollars are going further because you get added features, but they are standard features this day and age. This kind of measurement manipulation is called hedonics. Google CPI hedonics if I didn't explain this well enough.
The Federal Reserve's Explicit Goal: Devalue The Dollar 33%
The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.
An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.
But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.
The Fed’s zero interest rate policy accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits. In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years.
Why target an annual 2 percent decline in the dollar’s value instead of price stability? Here is the Fed’s answer:
“The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve’s mandate for price stability and maximum employment. Over time, a higher inflation rate would reduce the public’s ability to make accurate longer-term economic and financial decisions. On the other hand, a lower inflation rate would be associated with an elevated probability of falling into deflation, which means prices and perhaps wages, on average, are falling–a phenomenon associated with very weak economic conditions. Having at least a small level of inflation makes it less likely that the economy will experience harmful deflation if economic conditions weaken. The FOMC implements monetary policy to help maintain an inflation rate of 2 percent over the medium term.”
In other words, a gradual destruction of the dollar’s value is the best the FOMC can do.
First, the Fed believes that manipulation of interest rates and the value of the dollar can reduce unemployment rates.
but debasing the currency via high inflation in consumer prices is not one of them.
There is more than one way to skin a cat, there is more than one way to debase currency. The 2000's aren't the 1970's. It's a global economy with global wages and global prices. The sharp wage price spiral of the insular and isolated economy of the 1970's isn't really possible any more. Hyperinflation through sheer stupidity is always possible, but hyperinflation is a political event not a monetary one.
The assumption of the original post is the excess money is going to purchase consumer goods so should be driving up the prices. Why should anyone assume that? Where is the money from the Fed's printing press money going? Consumers? I think not. It's going to the FIRE sector. Dotcom bubble, housing bubble, now the government bond bubble, stock market prices (why the hell is the dow at 14,000 or even close), the list goes on. There are plenty of places where the increasing money supply is going. Consumer's pockets just isn't one of them. Crony capitalism is alive and doing quite well thank you.