Topic: Can you quantify inflation? (Read 381 times)

This is definitely true, we are not going to see the situation changing all that much and we could see this not changing and because of this we are going to end up with a trouble that would not be that easy to handle as well. I know that it is going to take some time but we can just make sure that we are dealing with something that is taking a bit of a time.

If we can't trust the government when they give us an inflation number (to be fair any number) then what are we going to see? We are not going to see anything changing all that much, it's the same thing and we need to focus on doing the right thing and calculating as an independent company if we can. This should be the most important thing, we can definitely consider this as a good thing and this is why I believe that we need to keep thinking that they are giving lower numbers and not giving the correct information at all. I know that it will take time but it will happen eventually one way or another.

Absolutely every statistic that's provided by the government about the economic situation, including inflation. Keep in mind that it is always far from reality and carries absolutely zero value.
Our local currency strengthened against USD but prices on groceries have gone up more than 30%. Rent went as crazy as 100% and 200% high but that's because after the war, rent demand increased from foreign Russian and Ukrainian migrants. Sadly, our population decided to milk them among with local people and rent here, in Georgia, is as expensive as in Dublin, Ireland, while salaries are ten times lower than in Dublin.
The local government says that everything is okay and the economy is booming. That's far from reality.

I'll tell you more shocking info. Before I say anything, keep in mind that food in my country is way more expensive than in Italy, France and Germany (except meat). If you live or travel in Europe, you'll have an idea how much it costs there.
Our government officials say that a person needs to spend 60 dollars a month to have a diet of 2400 calories a day and in this diet, they'll get all the necessary macronutrients. I can't find the diet but I remember it was like two eggs, 60g of meat, 100g of bread and etc...
This is nonsense, 60 dollars will only keep you fed for 8 days and during these 8 days, you won't have a good, healthy diet.

I would go so far as to say that it is never the only factor. Money printing is often times the consequence of something going on beforehand. I doubt that there is a single historical event of inflation that cannot be considered multifactorial.

What we have seen over the past few years were significant logistic problems all over the world. At first logistic problems kicked in really hard when the pandemic broke out and then other minor and major incidents occurred, like the Ever Given being stuck in the Suez Canal. It caused direct damage and massive collateral damage as the canal couldn't be properly passed by other ships and the supply chain (30% of global container traffic was delayed) took a serious hit.

Direct and collateral damage have been said to be tens and tens of billions of dollars for a seven days period and it's not like it is back to normal within a blink of an eye.

My take is that logistics, then of course tariffs and trade wars, but also military wars and the inevitable need for alternative logistic routes as a consequence are a major driver of inflation. Sometimes I think the money printing is more like the oil being spilled on the fires that are ignited by many other issues.

Drug prices are driven up by corporate patent strategies. It's production monopolies and logistics on the one hand, but plain patents as well of course and then legislation that allows single actors to exploit patents to the max. There are so many things driving up the cost of living that money printing is probably never the only cause for inflation.

You only need one counter example to dispute a theory, and there are countless of examples throughout the years, when inflation was high but there was no money printing been done previously at the same rate. So treating money printing strictly as the only factor, while arguably your best course, is still not always accurate.

Almost every inflation historically recorded has been created because of government programs or policies. The reason the price of goods in your country is rising at an excessive rate is unlikely due to "corporate greed" (people are arguably always greedy), it's most likely due to some bad government decision.

This is quite true, people are doing inflation calculations quite badly and because of this I think we should be doing something that would be calculating our own inflation and try to beat that and would do a lot better with time. This is why I think we should be making some good income with time, so that should be the most important part. I know that it is going to be great with time, and that will get a lot better with time as well and aim to beat that inflation at all times.

I think if anyone could make 10%+ increase on their income every year, it would be hard to get poorer with year, there could be some years that have over 10% inflation at times but we shouldn't be really considering that as the norm, that's only some years and normally that won't happen that much, normally we are going to see much less and not have that much issues and will be under ten percent so we should be making a good amount of profit if we can get that type of income increase.

Since there are people that are specialized in the economic aspect, I think it can be measured in developed countries where things work with policy and where there is price control over almost all its goods. And for the inflation percentage difference in some goods, I think the citizens will only complain of what they do consume.

In my country, there is no price control, the rate inflation is rising without regulation, and every market determine the rate they will sell their goods. These is the main why we are getting a setback in our economy, and nothing is working again, and the price of goods are now out of control.
Only good working government will be able to either control or solve inflation problem. I rather invest in Bitcoin than buying any property in my country right now.

And that's because you say so? Governments do the same thing, they quantify inflation with a basket of goods and services to say that those are the prices that matter to the average citizen but if you have lived through the increase in supermarket prices in recent years and what appears as CPI increase in the news you will see that it does not add up. Or the increase in car prices, even second hand.

My point is that debasement is the real inflation because it is the money that is put into circulation, and that it does not initially go to the goods and services that the average citizen consumes the most does not matter, because it is already in circulation and will continue to circulate, thus devaluing the currency.

This is the problem, if you take the price of carrot and tennis ball and shopping basket and beach towels to calculate the price then you may not get what is the right inflation method. If you really want to see the "real" inflation, things to care about should be price of eggs, milk, bread, meat, if you do stuff like that then you will see it and that would be great. Plus, there are things that goes up far greater than just inflation numbers, even when inflation was fine, school costs were increasing a lot more than the inflation price and now even more, so it's clear that things will change a lot.

At the end of the day, salaries do not go up as much as salaries and that is the real issue. If you make 100 dollars, inflation becomes 10%, then you should be making 110, but they don't, they give you 105, and you quit, and they get someone for 100, and they are in profit, and you look for jobs for six months and can't find one and accept 100 from somewhere else, so companies make money.

Well, I don't think it's false. Here you have two options, either you take all the money printed or you take into account other variables. If you take into account other variables you will end up doing like the government, although in this case you are not doing it out of political interest.

To take into account all the printed money is to take into account all the destinations of that money. If you do not take them into account, as the government does, which includes alcohol although not everyone drinks but does not include bitcoin, what you are doing is saying that the money does not devalue as much as it is printed because there are destinations of the money that do not matter, such as the increase in the price of bitcoin. This way the inflation rate will always be lower than the debasement.

Yes, definitely. But the question is, are inflation measures accurate? The inflation indexes may not actually all correct, as there are also chances of having some lapses, but they aren’t wrong as well. However, with the help of some inflation measures, be it the so called CPI  or other international standards, we can quantify and may derived into an outcome, if not exact, maybe at least its estimated inflation rate.

The government is not just randomly choosing what to include in the CPI basket. It's not like they're choosing A, B, and C and intentionally avoid D, E, and F to come up with better figures. What's included in that basket are the basic goods and services that people commonly consume day by day.

And it's not like they're choosing certain goods to be measured right now so that they can actually pick those particular goods that haven't increased at all or have very low increases. The list of the goods and services are already there. They just go to the market or wherever every month to check on their prices.

Anyway, although inflation can be quantified, ways to measure it wouldn't probably be as accurate as we would want. There will always be weaknesses, errors, shortcomings, and so on. They don't 100% reflect the living situation of every John, Mary, and Peter on the ground. At the very least, however, we can grasp the general picture.

I think it's possible to quantify inflation relative to where you live and what you live on. Someone in a developing economy with a weak currency experiences inflation differently from someone who is using a hard currency.

A blanket percentage for the rate of inflation will work for staple goods like fuel, transportation and the most commonly taken food produce within that region, but when you include in optional products the effects narrow down and start to matter less.

This is quite a nice definition of inflation. However I think I can add a little contribution to what you have here. Well from another perspective it's safe to say that inflation is gradual devaluation of a currency with respect to prices or general pricing of an economy. The effects of inflation are quite obvious to spot out because the whole world as of right now is averagely suffering from inflation. One of the simplest ways to put all these is that same amount of money can't purchase same items like it could a few years back.

Inflation is worse in some economy especially those where it's not properly managed or in countries with insufficient natural resources to combat it. From the stance of the economy of a whole nation to just regular individuals, inflation is a general problem and that's part of the reason why we mention bitcoin hodling every now and then just to make sure we can combat the effect of inflation on us.

You're definitely right on your point of view and I want to share my own thoughts as well, inflation has been on the rise now and there have been so many measure to quantify it that include the CPI "Customer Price index" you mentioned earlier and yes you can quantify inflation based on  the price of goods of a customer, I can explain abit with my understanding of it.
For example let's say we have two persons, Mr A and Mr B and they are trying to purchase different goods, Mr A would want to purchase goods on lower rates and demands while Mr B would want to get good on higher demands, now the fact that Mr B tend to purchase higher goods based on demands would make it possible for quantifying that goods this leading to inflation but I don't think this school of thought is necessary at all.

Ahh, my heading is buzzing anyway, for a person until or unless the living base is stable he won't care about inflation, as he's making a good living and he knows even if there's high inflation I'm able to service why he'll fall into such discussions, for those who are barely managing their livings it does matters. anyway, that was a random comment but as we are discussing the problem and solution.

According to the general study of the CPI and your comments in my view, there should be a diversified set of data, not like CPI data should cover the inflation in different sectors individually, it will give a realistic and detailed result, Let me elaborate as according to example there are 2 subjects with utility of A B C and D F G respectively, we can categorize their data into 2 sets where  A B C are relevant to the Medical i.e and D F G are related to Food & Agriculture i.e, and if there's a diversified data which is covering both individually it will make sense to both.

I know the practical implementation will still be a question due to its complexity but it's not impossible, this will allow governments to implement their policies in a different direction with a more efficient approach if they are willing.

We can measure but a general number is not possible at all, a diversified number can help a lot already and this what we need as well.

A number doesn't matter, what matters is reality and how willing are you to face it.

What about the meaningfulness after quantifying it? What value does this metric give you?

But what kind of conclusions does one make, even if the results are very accurate?

This is not the strict definition of inflation. Inflation is just what I said. You can have inflation, even without expanding the money supply. For example, if you raise the minimum wage by 100%, then your country will experience inflation, but the money supply will have remained the same.

Using CPI, things people spend more on takes a larger percentage of the basket, which can make things more irregular. This is because even if the prices of jewellery and electronic devices have increased, for instance, the cost of food and health care has not increased as much.

It won't be perfectly accurate in reality, because you can clearly see that the price of your milk has gone up by 8% since the past year, but the inflation rate is saying a 2% increase, but on the larger scale of things, its not far from the truth because you have to put everything into consideration.

I believe the only way we can have an accurate measurement of inflation is by not having a single inflation rate.
We can divide them into different categories. For example, we can have something like;
Real Estate: 9%
Transportation: 10%
Food: 12%
Education: 7%
Health Care: 8%. and so on.
I believe this will give a more accurate figure.

if we're considering an ideal case where whatever agency that's in charge of monitoring the inflation on the prices of goods, services, transportation fares and a lot of other primary things people generally make use of carry out genuine analysis on these things accross different regions without being biased with the final inflation result they bring to the public, then inflation can be measured with those data but if not, the most common way to measure inflation is to go to the people at the grass root and that are not doing well financially and ask how much positive or negative change in the price of goods and services they've witness in a set out area at a particular period of time.

The average man on the street knows that last year, a litre of petrol was sold at certain price and that it has gone up or down by certain percentage by this time of the year. He he can also say same for medical bills, price of foodstuffs in the market and cost of taking care of an household for a week or month. This is the real data that quantifies the level of inflation in an area and if it's to be quantified, it's through this data that you can get an actual difference in the cost of living in different regions of the society.

In Africa two things determine the increase of goods and services in the continent. And those two factors are Petrol and dollar. Whenever these two things increase in rate, every other things would increase and there is no selective goods or services but everything. Inflation is Africa cut across every sectors. And it is the "General Increase of goods and services" is term in Africa. And they are two parties that benefiting from inflation. The Capitalist and the government and the capitalists used the government to inflate the prices so that they can make more profit from their industries.

If the goods in the basket (basket of goods) can be changed then it is possible to measure inflation. And that means inflation is measured by the "basket of goods and services. Though the inflation periods in advance countries and Africa have difference base on the geographical habitation and economic power of the citizens. Inflation hit African countries more than the advance countries.

That's the truth as far as the numbers reported by the government go--it sort of reminds me of when the Dow or S&P 500 get companies added or subtracted from it, and suddenly those indexes start shooting up. 

But aside from my general distrust of statistical abuse, I do see prices not inflating like it was 2021-22, so while the latest report might have been exaggerated, I do think inflation is decreasing.  That's not what takes up space in my head, though.  I'm wondering what's going to happen to the stock market (and crypto, too) once interest rates start coming down--and that's going to happen very soon; it's just a matter of what the Fed decides.  Hopefully they take a conservative approach and only cut the federal funds rate by 0.25% and not 0.5%.  There are a whole bunch of interconnected moving parts in the economy, but inflation and interest rates are among the big boys.