Suggest something radical like that Ben Bernanke has done a good job of being Fed Chair, and invariably someone will tell you that there’s tons of inflation, if only you looked at the price of bread recently.
So why do people insist that there’s so much inflation?
Probably because they have no idea what it is.
Scott Sumner made this point last autumn:
Many people tell me that the “average people” they talk to simply don’t believe inflation rates have been low over the past 4 years, despite the headline CPI rising at roughly a 1.2% rate since July 2008. There are three reasons for this cognitive fallacy:
1. Confusing rates and levels.
2. Confusing ‘cost of living’ and ‘standard of living.’
3. Assuming the term ‘inflation’ refers only to the rise in the price of things they don’t want to see get more expensive.
Point number 2 seems like the most salient. Inflation is just a code word for people that means: it’s hard to buy stuff. And actually that’s been a pretty legitimate complaint over the last several years, given widespread unemployment, or fear of becoming unemployed if you have a job. And the fact of the matter is that the economy is still depressed.
But it’s also true that if you just go out and ask people, they’ll say things are better than they have been in years.
The Bloomberg Consumer Comfort Index — a survey that basically asks people how they’re feeling about the economy — is at 5-year high.
Things aren’t amazing by any stretch, but it’s just not true that prices are spiraling and that people are falling behind. And the people who do feel as though they’re falling behind are rapidly diminishing.
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