Tuesday, December 18, 2012

What is Chained CPI?

What is chained CPI (Consumer Price Index)?

Well, it is a proposed difference in how we measure inflation and cost of living - which has implications for social security payments and probably a lot more real world stuff. 

Economists assume that when prices rise on a product, people turn to a less expensive alternative. Substitute chicken for beef, for example. In the past, the rise in beef prices would be counted as inflation.

Under chained CPI they wouldn't be. The reasoning is that lower cost alternatives are available so inflation won't affect you. 

Translation: Since you cannot afford to buy it, there is no inflation. 

Here's a very detailed article from the National Journal.

Here's a summary from the Washington Post.

Tuesday, December 4, 2012

The Case of Brazilian Inflation: Perception Problem or Stealth Devaluation?

For decades, Brazil suffered from inflation. So much so, that public confidence in the currency (the cruzeiro) suffered. Prices continually rose from week to week.

So Brazil printed a new currency that always stayed at a fixed rate: The Unit of Real Value. (By the way, this is why the Brazilian currency is called a real).

If eggs cost 20 cruzeiros, they cost 2 URVs. If eggs cost 40 cruzeiros next, they still cost 2 URVs. Eventually, people started using the Real and inflation abated.

Or so the story goes.

Here's a good basic summary of the situation from NPR
A more detailed academic version is here.

Being a cynical sort, I ask myself if this wasn't a stealth devaluation of the currency? Goes beyond an innocous perception problem. Think about that.

Monday, December 3, 2012

Tax Incentives for Large Corporations in Texas

Here's an article that details the tax incentives/corporate giveaways (depends on your perspective) to such companies as Amazon, Apple, and Samsung in Texas.

Texas has produced a lot of jobs, but they are not high quality, high paying jobs (which can disappear at a moments' notice). State infrastructure is also not growing along with population growth, implying that tax revenues are inadequate.

So the question for you is: is this is worthwhile tradeoff?