When Verizons Multiply, Macro In Inflation

Inflation always brings out an emotional response. Far be it for me to defend Economists, but their concept is at least valid – if not always executed convincingly insofar as being measurable. An inflation index can be as meaningful as averaging the telephone numbers in a phone book (for anyone who remembers what those things were).

If you spend $1,000 a month on food for your family, and food prices rise 6% generally that’s an additional $60 that has to come from somewhere. It is substantial. By the very nature of food and food shopping, and how you pay for groceries more directly, that price increase sticks in your mind for the amount you’re pinched.

However, during the same month, Verizon suddenly lets you switch to an unlimited wireless data plan which takes your monthly bill from, say, $195 down to $160. You may not, and most do not, factor that into your “feel” of general consumer prices (nor do you factor how everything once contained within a phone book is now available with your Verizon plan already on your “mobile device”; that’s another story, though).

You sense 6% inflation even though overall (in just this two item “basket”) your actual price increase is just a smidge less than 2.1%.

In macro terms, we want to know why for each of them. If food prices are rising because they are rising, but Verizon isn’t feeling very good about its data plan pricing because it can’t sell near enough to consumers at the prior price (or higher), then the inflation rate reflects what is a macro difficulty. It is a legitimate economic drag captured imperfectly by a flawed concept.

And then there’s the price of oil.

For Chairman Powell and his gang of awful forecasters, he’s always had to fight WTI like his predecessor Janet Yellen (Euro$ #3). The only one who received a substantial lift from it apart from a few months occasionally strung together was Bernanke – not that it did him any good.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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