3 ms·

> The question if the goods basket that is used to define inflation actually reflects reality is valid though! Why? You're only trying to determine the change

• mschuster91 2y ago
  > Implying that an urban dollar isn't the same as a rural dollar? The same dollar buys me a lot more food and accomodation in rural areas. To give you an example, average rent for 60 m² in Munich will easily run to 1200-1500€ a month, and that's net (so you got to add heating and utilities on top). In Eastern Germany, you can get 80 m² for 300€ a month. A trip to the grocery store is about 100€ in Munich, maybe 50-60€ in Eastern Germany, simply because the staff and rent cost of the grocery store are also much lower than in Munich. Unfortunately, collective wage agreements, UI benefits and pensions are federally the same across Germany - that means for example the train driver in Munich barely scrapes by because cost of living eats >50% of his paycheck while the train driver in Eastern Germany lives like a king.
  • deleted 2y ago
    [deleted]
  • 9rx 2y ago
    > The same dollar buys me a lot more food and accomodation in rural areas. That's because food and accommodations are often less valuable in rural areas. Supply and demand, as they say. But that is outside of the scope of inflation. As before, inflation seeks to measure the value of the currency itself, which also fluctuates in value just like everything else. > Unfortunately, collective wage agreements, UI benefits and pensions are federally the same across Germany Theoretically the value of the dollar could differ from place to place like food and houses – value is just arbitrary human opinion, after all – but as currency moves freely, everyone tends to agree on its value across entire countries (and usually the entire world). In practice, you'd also find accommodations and food settling on the same value across entire countries if we had magical portals that could move them to and fro on a whim like we can with currency. But it seems like what you are really thinking of is a cost of living index. Usually those are prepared on a regional basis for the reasons you have described. Inflation is decidedly not intended to be a cost of living index and there is no reason to turn it into a cost of living index. We already have that – not to mention that we also need to understand inflation. You may be also implying that some people use the wrong tool for the job (i.e. trying to use inflation as a cost of living index), but in that case the problem isn't that the tool broken, the problem is that the people are broken. The question then is not "What will it take to modify this screwdriver so that it is better at driving nails?" The question is "Why the fuck aren't you using a hammer?"
    • mschuster91 2y ago
      > As before, inflation seeks to measure the value of the currency itself, which also fluctuates in value just like everything else. In the end the root problem is that both the EU and US suffer from having one currency for wildly different markets, which is causing a lot of issues. > You may be also implying that some people use the wrong tool for the job (i.e. trying to use inflation as a cost of living index), but in that case the problem isn't that the tool broken, the problem is that the people are broken. The question then is not "What will it take to modify this screwdriver so that it is better at driving nails?" The question is "Why the fuck aren't you using a hammer?" Yup, that's the second problem. "Inflation" is the _only_ tool other than stonk market indices that's being used by politicians, media and central banks to judge "how is the economy?" and derive consequences, but as shown it's much too coarse of a hammer.
      • 9rx 2y ago
        > In the end the root problem is that both the EU and US suffer from having one currency for wildly different markets, which is causing a lot of issues. What's the problem? Money is just debt. Having confidence that you can call the debt at a later date is the only property that is of true concern with currency. As long as you have the confidence, it theoretically doesn't really matter which currency you use as your IOU. Perhaps you are suggesting that those particular currencies are losing confidence? You could especially make that case about the USD right now, methinks. But if each state/city/rural area in the USA, for example, had its own currency, would they really garner any more confidence? They are still subject to most of the same whims that is giving the USD its current look. > "Inflation" is the _only_ tool other than stonk market indices that's being used by politicians, media and central banks Aside from the media, which I think is a fair point – it likes the headline grabbing attention metrics, that's not really true. You are right that a primary objective of a central bank is to keep the currency stable so that people remain confident in it, so it may seem like it disproportionately focuses on the value of the currency, but that's kind of its job. But they aren't even looking at a single inflation measure. If I recall correctly, the US uses around 30 different measures of inflation internally. > to judge "how is the economy?" and derive consequences, but as shown it's much too coarse of a hammer. Thing is, the national economy doesn't really matter that much to your every day life, does it? As long as your local economy is strong, who cares (I mean in a self-serving way, not taking pity on those affected) if people on the other side of the country are struggling? While countries do vary, typically the nation is only concerned with big picture things like keeping confidence in the currency. The actual economic issues are for local governments to sort out. Hence the old adage of the municipal government being the most important. And municipal governments should be looking at things like cost of living indices for their region. If they aren't, it is time for some tar and feathering.