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Gus Van Horn blog

Reblogged:'Shinkflation' Affecting Economic Forecasts

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Over the years, you have probably noticed prices remaining steady for things you often buy, but their sizes or quality declining. My own mental nickname for this has been stealth inflation, but the Economist calls this shrinkflation.

The piece reads like its author is eager to bring back the good, old-fashioned kind of inflation. And he seems to draw the wrong lesson from the phenomenon, but nevertheless he raises an amusing point on the way.

Shrinkflation and the related phenomenon of "quantum pricing" are giving government forecasters fits:

What's really shrinking, along with government credibility. (Image by NeONBRAND, via Unsplash, license.)
If it happens on a sufficiently large scale, the practice of tweaking quality in lieu of price could play havoc with essential economic data. Statistical agencies do their best to account for changing product quality, but if adjustments are unexpectedly common or subtle then muted inflation figures could easily be concealing a more turbulent economic picture. Central banks watching for big swings in inflation or wage growth as a sign of trouble could be reacting to figures that bear far less relation to business conditions than they used to.
As if the government ever really knew how to measure the havoc it necessarily wreaks by tinkering with money...

The author mistakes familiarity with clarity in his last paragraph when he wishes for a return of perpetual price increases. (A Venezuelan or two might disagree.) The fact of the matter is that, regardless of how it manifests, inflation of any quantity is nothing more nor less than a method by which governments pilfer our savings.

I, for one, could do with the actual clarity that can only come from the certainty that that isn't happening at all.

-- CAV

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