The Consumer Price Index tracks a basked of goods that is supposed to represent the purchases of an average American household. It is used as a gauge of inflation. The Federal Reserve will change monetary policy in response to changes in the CPI.
However, Barry Ritholtz, writing for Seekingalpha (an investing blog), argues that the CPI is "a lie." Many wage increases, and I believe Social Security payments, are linked to the CPI, but he feels it understates the effects of inflation.
For him, it's an investing issue, because he thinks that much of the stock market gains over the last few years were driven by the gap between actual and stated inflation. However, for me, it's a justice issue. Americans' health care costs are rising really fast, for example, but the people running the economy may not notice, because the CPI tells them everything is fine.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment