Wednesday, August 4, 2010
It's interesting to break out the components of price changes. The above graph (data from Fred), shows how several major components of the US consumer price index have changed over time. The central bank acts to keep average price changes more-or-less in a narrow band (currently less), but that is a sum of individual components which are going all over the map. In particular, the ability of the medical sector to extort more and more from the rest of us is very much in evidence. (Note that, at least in theory, the price indices are adjusted for quality changes, so this is supposed to represent the price change in equivalent good and services, not the availability of new/better goods and services).