Within the past year, I have posted several ideas about inflation. [If you have not already, please, for context, read earlier articles in the substack.] One of these is the fact that inflation affects the prices of all commodities EQUALLY although the US Bureau of Labor Statistics Consumer Price Index (CPI) breaks out UNEQUAL price increments (or decrements) amongst its cherry-picked commodities as it ostensibly reports inflation numbers as an average of these itemizations.
The CPI reporting exposes a huge linguistic defect—which is to say a huge intellectual defect. I have mentioned this before, but herein, I’m attempting to explain this somewhat differently.
Some news organizations criticize the government for skewing the numbers. This is deserved as the present index evaluates a bucket of commodities that is not comparable to the bucket used decades ago and that includes commodities that are not as relevant to the so-called cost of living. But in their criticisms, these critics completely miss the elephant in the room.
This idiom usually refers to an obvious problem not mentioned, but, in this case, it is obviously inobvious. Perhaps, both elephant and room are inappropriate as the overlooked problem is global and seemingly invisible… suggesting something like an ethereal miasma—me speaking facetiously—that corrupts the thinking of all governments and economics schools.
A commenter to The Gateway Pundit recently provided a clarifying perspective on this with his mentioning of “item.” Of course, he had no idea that he was under the spell of my imaginary ethereal miasma. Item is a mere word, but perhaps a linchpin to a revelation of the bad thinking about inflation.
Commenter:
Inflation is more like 50-200% depending on the item.
If you believe it is 6%, you are a fool.
We are accustomed to itemizing the cost of things. We do this for our personal accounting, businesses, wills, insurance, the IRS, etc. Itemization is a natural fit with our analytical objectives and it is often useful, but with inflation, it is misapplied.
Again, inflation affects the prices of all commodities EVENLY (equally)… and ALWAYS UPWARDLY! And it’s impossible to itemize the effectS of inflation (as there is only one effect of inflation) like what all governments attempt with their versions of a CPI.
When the money supply is expanded (inflated) and devalued, all the money—not just specific parts of it—is devalued and devalued equally (and NEVER revalued). The devalued dollars you use to buy eggs are not of a different value from the dollars you use on the same day to buy potatoes or motor oil. However, the egg price may have decreased as the potato price has increased and the oil price has remained the same.
Scarcities, gluts, taxes, etc., and other "normal" or "non-inflation" economic forces affect the prices of commodities UNEVENLY. The daily value of the dollar remains the same amongst all the commodities, but the rate of exchange might increase or decrease for each commodity (actually the rate of exchange between the commodities with the dollar as an intermediary) due to economic factors apart from inflation.
Itemizing the uneven effects (effects, plural—changes upward or downward or none) on specific commodities and then averaging these itemizations CANNOT account for the one, even and always upward, effect (effect, singular) of inflation. It’s neither workable or representative of what we desire to measure, that being inflation.
[*Note that the title is deliberately written “Itemizing” Inflation Effect and NOT “Itemizing” Inflation Effects.]