Look Ma, No Inflation

The Fed began a 2-day meeting today with many members in search of inflation. I happen to have a few charts for the Fed to ponder.

Medical Premiums

The feature chart on Health Insurance Premiums is from the National Conference of State Legislators. Those not in a company plan and not getting rebates report increases of 50% or more.

Yet, the BLS tells us the Medical Services CPI rose only 1.7% over the last year. Medical Care Commodities (drugs) rose only 1.0%.


The Index for Shelter rose 3.2% according to the BLS. Primary rent rose 3.8% with Owners' Equivalent Rent (OER) up 3.2%

The BLS does not consider home prices as part of the CPI. Instead, here is the exact question the BLS uses to determine rent increases: "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?"

OER has the largest weight in the CPI at 24.583%.

Not Inflation

The folks at the Fed do not count a penny of that as inflation. Instead, it's called a capital investment.

Not all of that rise represents inflation. Homes are bigger, with more features and better windows, better layouts etc. That said, the bulk of the rise is indeed a function of inflation.

Case Shiller

The Case Shiller index measures repeat sales of the same house. Improvements or degradations may or may not be accurately priced in but the index provides another look at what inflation might be.

Case Shiller Year-Over-Year Increases

In November of 2012, year-over-year inflation topped 5% and from then until now, never dipped below 4.3%. Home price inflation is currently 6.0% rounded to the nearest tenth.

The BLS says shelter is up 3.2%.

The Fed cannot find inflation. It thinks inflation is too low. Collectively, they are crazy.

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Mike "Mish" Shedlock

No. 1-25

Yeah, right. There is NO inflation - outside of home rents/prices, health care expenses and college tuition fees!


US insurance companies are trying to muscle in and ruin someone else’s National Health Service? Isn’t that like blaming a disease on the victim who caught it before you?

I think the comments agree in one regard: a number of things are less affordable than they used to be, especially medical care. Unlike some on this blog, I am not eager to have government take over what is left of the US medical system. I view government as being no more trustworthy than the average corporation. I would like them to get out of the business of paying other people’s bills and instead return to the roll of enforcing free market principles.


I think the comments miss the point. It is not about illegals but the financialisation of medicine that is ripping everybody off. Just the cost of your insurance companies as a % of GDP pays for our entire National Health Service, but even here your insurance companies are trying to muscle in and turn what was the most cost efficient and effective health care system in the world into a shameful replica of the abomination that is the US medical system.


Both health care and housing are getting less affordable for one simple reason: People are banned from supplying additional units, despite their ability to do so at below prevailing cost.
In free markets, prices drop. Which puts the onus on those who wants to make a living, to provide goods and services in an ever more efficient manner. Which lowers costs over time.

In every.single.free.marlet.ever.in.the.entire.history.of.the.entire.universe, downwards is therefore the trajectory of costs over time. Without a single exception ever. Past, present nor future. Not just amongst people, not just on earth. Heck, it’s not even limited to universes with anything resembling our particular set of natural laws. It’s genuinely universal: lower cost, more efficient providers and/or means of provision, will replace higher cost, less efficient ones. Lowering costs over time.

The only way to prevent this, is to straight up ban people from freely interacting. Which is nothing more than a slightly obfuscated way of stealing from both banned suppliers, and from those demanders who would otherwise have benefitted from the lower cost that free market supply would bring. AKA, crass theft: From those who produce and those who would buy their output; to unproductive incompetents with nothing going for them but closer connections to the thieves. Which, of course, neatly summarizes all that once-was America is about anymore.