So there are a few flaws, but it generally looks pretty good, right? Well, if you have been following this blog you know that CPI understates inflationary changes and so I am not a fan of it.
This graph, I believe, is much more informative. It shows the percent change of M1 (a money stock) and percent change of total employment. Notice a trend? I see huge spikes in M1 during recessions and tremendous falls in employment anyway. Furthermore, look at the period between 1900 and 2000. When M1 was rising employment was rising. However, when M1 was decreasing, unemployment did not change. Is that a big problem? You bet, as the same problem is evident between 2000 and 2005.
Finally, a very simple graph. It shows inflation in food prices each quarter. Notice how food has rarely bee cheaper, and how the rise in food prices today is relatively high? And this is still using a CPI method that understates inflation. Should we be concerned? I think the graph shows that this is very worrisome.
Now I know that I presented some controversial conclusions, but my main point was to show what you can look up with these graphs and how useful they can be. They are fun, but just remember that correlation does not prove causation, the post hoc fallacy, and that government measures are seriously flawed and able to be tampered with. The only good conclusions in economics can come from a priori reasoning, so while this is enjoyable, remember that the basis of truth in economics comes from good reasoning, and empiricism can never show you causation, only theory can.
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Interesting information you presented. I can't wait for the inflation!
ReplyDeleteThe monetary inflation is already here, but the price inflation is debatable. But monetary inflation is a pretty bad problem, just see my article I linked to in the post entitled: "Why is Inflation so Bad?"
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