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Willisms

« The Ninth Mainstream Melee -- The Tax Cut Boom. | WILLisms.com | Quotational Therapy: Part 99 -- President George W., On Immigration. »

Trivia Tidbit Of The Day: Part 332 -- Inflation Out Of Control.

If These Are "Record" Energy Prices, How Is It That Inflation Is So Low?-

The average annual inflation rate from 2001 to 2005 was 2.56%. Indeed, despite "record" energy prices, inflation remains tame:

inflationtame.gif

Compare the recent numbers to the average annual rate of inflation from 1993 to 2000: 2.6125%.

Or 1977-1980: 9.725%.

Even with "record" energy prices, a housing boom, and GDP growth well above modern historical averages (let's go back 35 years), inflation is just plain under control:

annualinflationrate.gif

Now, of all the economic indicators out there, inflation is one of the harder ones to tie to an administration's economic policies. Nevertheless, inflation (along with job creation and the stock market) is one of the primary shortcuts Americans use to judge the health of the economy.

Although inflation is low today, the overwhelming media hype about gas prices has likely contributed to a false sense that we once again have 1970s-style runaway inflation.

Thus, even though inflation is low, and American presidents usually (and, usually unfairly) get credit or blame for inflation, President Bush is likely getting credit/blame for high inflation.


-------------------------------------

Previous Trivia Tidbit: Tax Cuts Worked, Majorities Matter.

Posted by Will Franklin · 15 May 2006 02:03 PM

Comments

Rising costs do not automatically mean rising prices -- they can instead mean lower profits.

Posted by: KipEsquire at May 15, 2006 03:05 PM

Those are great charts. Inflation is so low if I go to the store to buy food $50 gets me about as much as it did last year. My salary increases are much higher than the minimal rising cost for medical benifits. The 60% plus of Americans whinning about their lack of confidence in the economy are shrugging off their capital gains from their day trading. Note:the main problem with limited profits is that some companies are still lagging behind in layoffs, plant closings, and outsourcing.

Posted by: Drew E at May 15, 2006 05:09 PM