Friday, September 16, 2011

Inflation vs. The Cost of Living

Jim Luke of EconProph summarizes Atlanta FRB's David Lockhart's distinction between inflation as a continuous general rise in the price level and fluctuations in the cost of living.
We are now seeing a disconnect between how the public and policymakers/central banks perceive what each calls “inflation”. The public at large, encouraged by talk from the hard-money gold crowd, are encouraged to see “inflation” whenever certain key prices go up. Recently we’ve seen gasoline and food prices go up, and along with these price increases more people are worrying about “inflation”. In reality, they are worried that the “cost of living” is going up. Rises in the cost of living is not inflation.
Read the rest at Inflation vs. The Cost of Living
(h/t Unforgiven)


Anonymous said...

The distinction still seems a bit bogus. When the price of everything we eat, wear, fuel our cars with, heat our homes with along with payments to insure our health and educate our kids is rising, who cares what "inflation" is doing?

Rodney Rondeau Jr. said...

It is important to distingusish between the two if you are ever going to fix what is causing them, no?