Live World Indices are powered by

Tuesday, 27 August 2013

BIG Mac Measures Inflation

Over 350,000 Trillion Served

The BIG point here is that no one in their right minds trusts or believes the CPI numbers anywhere on the planet. It is a number that by its very nature is subject to all forms of manipulation. Yet it is perhaps the most critical economic metric in the field of abstract economics.From this number investors set their expected rates of return inclusive of inflation. There are many pundits, economists and advisers who are saying this number has been pushed deliberately downwards to match the current policies of government.

We believe them because the grocery store bill, gas pumps and McDonald's prices seem to be way ahead of reported national CPI figures. Who do you believe? What is the real CPI?

One approach, as suggested is to look at the hours of work required to buy a staple or basket of staples. But even that is open to transgressions, such as: who is the average worker and what are their wages? Then do you apply local,  regional or national wages? Is there a solution?  Not really, save for doing you own personal calculations, both for personal and investment purposes. That number is probably as good as any, but certainly of more relevance to your circumstances.

Remember that in the end money is a medium - being a communication device intended to transmit a subjective value idea from sender to receiver. The message of value transmitted is an abstract that will never be subject to object scientific measure. It is simply the best social device we have to facilitate human activity.

First Financial Insights
August 27, 2013 

"Money ain't everything it's true, but what it can't get...?"
Beatles, Circa 1961

Search This Blog