>On Behalf Of Enrique Diaz-Alvarez
>
> Cool! There's no inflation! And if anything goes up then we call it a
> "sharp movement" and it doesn't count.
> http://nypostonline.com/business/25545.htm
>
> Doug, are things really *this* bad at the BLS? This Crudele guy tends to
> exaggerate;is it true that without those "ex-anything that goes up"
> adjustments inflation would have been an annualized 12% last month?
Whether this is screwy depends on why we care about inflation. If we care about it in order to adjust social security and other spending to help people pay the bills, then it's a terrible distortion.
But if it's to guide monetary policy, it seems like there is more argument for it. At least from the Greenspan-conventional wisdom perspective, the fear of inflation is largely based on the fears that "excess income" by consumers will bid up prices and ignite an inflationary cycle. Since the oil price spike is completely independent of consumer actions, it does seem that factoring out the OPEC oil price spike makes sense for a lot of policy areas.
-- Nathan Newman