[ConstantineX]

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The moral of the story is that these economy wide econometric numbers really AREN'T that useful. The only number that is useful, imo, really IS the money supply. That's the one that drives the rest. It's the one that allows you to see the man behind the curtain and what he is doing to you and the economy.

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this, however, is what i was talking about. real life, in the form of people living day to day hasn't been robbed like ron paul and you imply wiht this to the degree that the money supply increases.

sure, milk is whatever it costs, but that isn't a 20% yearly increase (or whatever money has averaged over a long time). further, important things like durable goods etc. aren't changing anywhere near what the money supply would imply they are.

additionally, money supply #s catch huge flows from assets to bank notes/credit etc. that aren't useful and bias upwards your "true" measure of inflation.


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Agree wholeheartedly with Barron here. This is where some of Ron Paul's supporters get me - how can you suggest inflation is higher than GDP growth over the amount of time we've been meaning measuring it faithfully? Shouldn't we have noticed a fairly severe decline in our standards of living by now? More importantly, even if headline inflation were as high as you suggest, it doesn't matter if the market has correct expectations of future inflation and adjusts nominal interest rates accordingly. If the government's numbers were completely wrong, we'd expect to see serious increases in interest rates as well as an added risk premium for not knowing the "true inflation rate" - moreover, an entrepreneurial opening for some firm that would collate and collect the true inflation rate that the market is trying to discover.