How can inflation be only a few percentage points and yet many goods and services are up over 50% since 2019?
In: 187
Follow the money.
Those same companies are also seeing record profits. There’s inflation, there’s supply and demand, and then there’s straight up price gouging. The fact of the matter is, companies are going to set prices as high as they can get away with. And for many products, we’ve just become numb to paying higher prices for things post pandemic.
Not all goods are counted in published inflation numbers.
https://www.marketplace.org/2021/11/22/whats-included-in-the-consumer-price-index-and-what-isnt/amp/
The consumer price index, a measurement for inflation, indicates the average consumer. Your own personal basket of goods and services may differ greatly from the average consumer. Things you buy may be rising in price faster than other goods and services. Also rhe cpi is very manipulated to give the impression of a stable economy, things are taken out of or added to the consumer price index. Propaganda pretty much.
To add, inflation is very related to increased money supply, in recent years those who can create money (banks) have abused this power to fíll their pockets and created a credit based society that is very vurnerable to black swan events.
Buy bitcoin.
50% in 3 years would be an annual 15% inflation rate. Also, some things will go up more than than and some less, so you can easily see “many goods and services going up more than 50%”. But on average the prices of everything are going up 15% each year.
The basket of goods represents what an average consumer spends their money on, and is used as weights for the CPI/inflation rate.
So items that make up a larger share of an average consumer’s expenses have a larger impact on inflation. You can view these weights and see a more detailed explanation at the [BLS website](https://www.bls.gov/cpi/tables/relative-importance/home.htm#Weights).
But basically, if your rent costs have gone up 10% year-over-year, and the price of getting a haircut has gone up 100% year-over-year, then the 10% increase in rent will have orders of magnitude more impact on inflation than the 100% increase in the cost of getting your haircut. This is because, for an average consumer, rent might be 25%+ of all of their expenditures compared to how much they’d typically spend each year on haircuts, which is likely a small fraction of a percent of their expenditures.
Basically it’s an average inflation rate for all goods. The price of your food increased by 50% but it’s all fine because purchasing a new dishwasher only costs 1.2% more! Just eat dishwashers.
Chatgpt assists:
Imagine you have a magic piggy bank. At the end of each year, this magic piggy bank makes more of the coins you already have inside it.
Let’s say the magic piggy bank makes 2% more coins each year. So, if you start with 100 coins, after one year, you would have 102 coins because the piggy bank added 2 more coins (which is 2% of 100).
Now, here’s where the magic gets even more interesting. In the second year, the piggy bank doesn’t just add 2% of the original 100 coins. It adds 2% of the 102 coins you have now. So, you get a little bit more than before.
This is what we mean when we say inflation compounds. Each year, the amount added is a little bit more than the year before because it’s adding to a bigger and bigger number of coins.
So, if the piggy bank kept adding 2% more coins each year for 3 years, by the end of the third year, you would have more than 106 coins. Even though 2% of the original 100 coins is only 2 coins, the magic piggy bank added a little bit more each year because it was adding 2% of a bigger and bigger number of coins.
This is just like inflation. When people say inflation is 2%, they mean that things are getting 2% more expensive each year. But just like with the magic piggy bank, that 2% is added to a bigger and bigger number each year, so the actual amount things get more expensive by is a little bit more each year. That’s why we say inflation compounds, or grows, over time.
Oddly enough, I had to scroll way to far down to find corporate greed.
Yes everything that the others have mentioned is also a huge factor. But for some reason, people are ignoring that corporate greed exists and it’s also a major driving part as to why prices (especially food) continue to climb exponentially.
Because corporations use inflation as an excuse to jack up prices (as well as deny raises and cut staffing levels, remove benefits, etc)
And it works, because instead of being in here asking why corporations are jacking up prices, you’re asking about inflation.
The problem is that inflation is a catch all conglomerate used to look at a lot of index items from utilities and food to TV’s and cars.
So you can have some items that can be near zero or even negative but other items way above 100% and still end up with a inflation that’s relatively low
For example
Cars, televisions, phones and such are all barely up in price at all , most are nearly zero change but food may be up 60% , so we end up with 60+ 0 + 0 + 0 + 0 all divided by 6 after showing an effective inflation rate of 10%
Latest Answers