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Inflation: A Long Term Perspective.

  • Written by Syndicated Publisher 49 Comments49 Comments Comments
    August 19, 2011

    The August 2011 Consumer Price Index for Urban Consumers (CPI-U) released today puts the July year-over-year inflation rate at 3.63%, which is fractionally below the 3.96% average since the end of World War II.

    For a comparison of headline inflation with core inflation, which is based on the CPI excluding food and energy, see this new feature.

    For better understanding of how CPI is measured and how it impacts your household, see my Inside Look at CPI components.

    For an even closer look at how the components are behaving, see this X-Ray View of the data for the past five months.

    The Bureau of Labor Statistics (BLS) has compiled CPI data since 1913 (BLS historic data). Our chart now shows inflation back to 1872 by adding Warren and Pearson’s price index for the earlier years. The spliced series is available at Yale Professor Robert Shiller’s website. This look further back into the past dramatically illustrates the extreme oscillation between inflation and deflation during the first 70 years of our timeline. Click here for additional perspectives on inflation and the shrinking value of the dollar.

    Alternate Inflation Data

    The ShadowStats Alternate annulized rate of inflation is 11.21%.

    The chart below (click here for a larger version) includes an alternate look at inflation without the calculation modifications the 1980s and 1990s (Data from www.shadowstats.com).

    On a personal note, the more I study inflation the more convinced I am that the BLS method of calculating inflation is sound. As a first-wave Boomer who raised a family during the double-digit inflation years of the 1970s and early 1980s, I see nothing today that is remotely like the inflation we endured at that time. Moreover, government policy, the Federal Funds Rate, interest rates in general and decades of major business decisions have been fundamentally driven by the official BLS inflation data, not the alternate CPI. For this reason I think it best to take the alternate inflation data as interesting but ultimately misguided statistic.

    Inflation: A Long-Term Perspective.

    Images; Flickr (licence/attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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