how is it possible there is no inflation if gas prices are 3 times what they were 6 years ago and have stayed there or above that level for quite some time - doesnt the cost of utilities,transport,packaging ,consumer goods all increase because of this .and at the same time hasnt the value of the dollar decreased on world markets by about a 1/4 of its value -but yet the fed continues to state there isnt inflation -I dont get it -why is there no inflation ? is it just because the fed says there isnt ?
The only thing I can think of is the Yuan is way undervalued keeping the CPI(consumer price index) low ? or some other costs of doing business has dropped - what do you think?
2007-08-17 01:41:00 · 4 answers · asked by rooster 5 in Business & Finance ➔ Investing
The Yuan is probably not undervalued. It is an easy target to kick, but the data is very mixed on it being undervalued.
Inflation is higher for some people than others, and is different in different parts of the United States. Inflation presumes pricing power on the part of producers. Otherwise, producers simply absorb the costs as lost profit. Inflation is up, but no where near the 80's. Further, energy's component of the economy used to be 1/3rd, it is now about 1/7th.
Think of it like this. In 1972 you often went in person to have a meeting, now you can do it electronically. Even though that is not the norm, it impacts fuel usage substantially. In 1972, during a cold wave most of the energy went out the walls, now insulation is standard and normal, again the fuel percentage is lowered.
Likewise, production is far more efficient in a number of ways, again lower fuel percentage.
The other big offset to inflation has been financial and real asset prices. If you have too much liquidity, it should increase the average cost of consumption goods. It can, instead, flow into inflating financial and real property asset prices. The bubbles of the last decade show where the money went.
China has also been keeping our inflation very low in two ways. First, they are sitting on $1 trillion in cash reserves that are out of the global money supply. If they release that money, there will be global inflation. Second, by keeping prices low in manufacturing, our domestic oil prices matter far less. They can absorb some of our oil costs.
Finally, Wal-Mart has induced a form of competition which has been estimated to have kept inflation one percent below where it would have been without them.
Inflation is likely from this current round of liquidity injections by the Fed, but look for 5% instead of 4%.
2007-08-17 02:07:20 · answer #1 · answered by OPM 7 · 0⤊ 0⤋
Gas prices are not included in the inflation.
If they were then the inflation in the United States of America would be over 10% and most americans would not believe their country is the richest country in the World.
Do not think about this too hard or you will move to Europe.
2007-08-18 01:50:28 · answer #2 · answered by Anonymous · 0⤊ 1⤋
Precisely, inflation kicked in in China, which is another reason to expect inflation in other places, US included.
2007-08-17 08:54:02 · answer #3 · answered by pgreen 6 · 0⤊ 0⤋
Consider this possibility. The government is lying. I believe inflation is running about 3x what the government says it is. Governments do enjoy lying you know, especially this one.
2007-08-17 09:51:48 · answer #4 · answered by Anonymous · 1⤊ 0⤋