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There’s No Inflation; Things Just Cost More

4:16 PM, Jun 27, 2014 • By GEOFFREY NORMAN
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There has been a long stagnation following the “Great Recession.”  No good news there. Lots of unemployment, hence no competition for labor and, thus, no increase in incomes.  But … at least there is no inflation.  That, anyway, is what we are told by the engineers with their handles on the economy’s throttles.  The Federal Reserve, in fact, would like to see some more inflation.

Well, maybe they have been looking in all the wrong places.  As Ben Steverman of Bloomberg reports:

Officially, inflation is nothing to worry about. Prices rose 1.8 percent in May from a year ago, according to data released today by the U.S. Commerce Department. That's the largest increase since 2012 but still shy of the Federal Reserve's 2 percent inflation target.

Meanwhile, in the real world:

A new report from the American Institute for Economic Research shows how rising costs for certain necessities make many Americans' personal inflation rate much higher.

Among the things that have gotten more expensive:

… water and sewer bills, have doubled since 2000. Gasoline is up 183 percent.

These things, it should be pointed out, do not fall under the heading of “discretionary spending.”

So while the official number, the Consumer Price Index is:

… up 47 percent since 2000, the institute’s Everyday Price Index (EPI) is up 69 percent … Among the culprits: college tuition and fees, up 130 percent, and child care, up 72 percent. 

However:

If you live in a city, rent your home and have skipped both car ownership and parenthood, you're in luck. The institute calculates that this hypothetical "urban renter" has seen costs rise “just” 43 percent since 2000.

So, incentives being what they are, the smart play is to not buy a home or start a family.

The new American dream. 

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