A very interesting piece of economic research appeared this week in ScienceDaily news service from the department of economics at Kansas State University, entitled Consumers Can Predict Inflation as Well as Professional Economists. This of course will come as no surprise to regular people, for whom economist’s double-talk is often seen as deliberately vague and couched in jargon that has no application to those in the lower echelons of economic stratification in this society.
Turns out that the actual price of milk and bread and gasoline can alert the average citizen of increasing inflation rates quickly and surely, and their predictions will then translate into how the family budgets their spending. Apparently one doesn’t need an Ivy League degree and a 5-figure Wall Street income to figure out that things cost more today than they did yesterday. Who would have thought such a thing?
Predictions about inflation are important because it tends to determine spending, saving and investment decisions for consumers and businesses. In a period of low to negative inflation savings accounts, bonds and long-term CDs are good investments, as return maintains the value of the dollars put away. In periods of rising inflation, extending credit and purchasing is a better bet, because the value of the dollars spent will continue to fall over time. Better to buy now and pay it back in yesterday’s dollars than save and have those dollars drop in worth.
Then, of course, there are those at the low end of the scale who simply do not have enough money coming in to save or invest, but who are merely trying hard to make the ends meet paycheck to paycheck. It is for those on a shoestring budget who suffer most in periods of rapid inflation. That they should be able to tell accurately that the money’s not going as far today as it did yesterday is no brilliant trick of statistical analysis. It’s just the way things are.
Duh.
Link:
Consumers Can Predict Inflation as Well as Professional Economists