Wednesday, July 20, 2011

Just How Bad is Inflation? (VIDEO).

Here's an interview with Morningstar analyst Bob Johnson in which he discusses the current rate of inflation compared with historical rates, and the factors driving that rate higher as well as those keeping it lower.



The highlights:

The current rate of inflation is approximately 3.4%, which runs very close to the average rate since WWII is 3.5%. But later on in the interview he's forced to admit that this statistical average is skewed quite heavily by the double-digit inflation of the 1970's. So in essence, the current inflation rate is higher than the average from WWII, once the aberration of the 1970's is excluded. The true average inflation rate is closer to 2.5%.

Of course, all of this is predicated on the belief that the CPI number is true and not manipulated down by the government. I leave it to the reader to decide for himself on that point.

All in all, it's mostly more of the same from the economic experts: Inflation is really nominal... unless you happen to need gas, electricity, food and any product manufactured from hydrocarbons (i.e.: plastic).

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