PracticalDad Price Index - July 2016: Confirming Deflation
It used to be that you could get a candy bar for a nickel. Then a year later, you could get three candy bars for a dime. A year after that, nobody had a dime.
- explanatory comment about deflation by 'Dryfly' to the writer in the comment thread of Calculated Risk, circa 2008
The prices for the PracticalDad Price Index grocery basket have been collected from the three separate and unrelated grocers and the results continue to confirm deflation and the failure of the Quantitative Easing programs to spark moderated inflation. The Total Index of the 47 item basket dropped again, this time to 99.51 from June's 99.90 (November 2010 = 100); the 37 Food-Only Sub-index (the 37 foodstuff items such as dairy, meats, etc) likewise dropped from June's 100.24 to this month's level of 99.01 (again, November 2010 = 100). The upshot? Although the aggregate cost of the full basket was actually less than at the project's outset in November, 2010, the aggregate cost of the 37 foodstuff items within the basket was still slightly higher. As of this month's result however, that Sub-index is now likewise lower than at the project's outset in November, 2010. So yes, hamburger will still cost more than almost six years ago, but there have been enough changes in other items to offset that and lower the aggregate cost.
You'd say that prices have actually decreased, which is seemingly a good thing. It's supposedly what we want, with prices stable or even a little lower so that we can get more for our dollar. But it really isn't all that it's cracked up to be and the opening comment from Dryfly - the nom de blog of an exceptionally astute individual - illustrates why. Prices for items can go up and down for different reasons, but the largest reason for the prices of everyday items to rise and fall is the aggregate amount of money coursing through the economy. When there is sufficient money flowing through, normally through family income, people are willing to spend and the price of a particular item is usually the point at which buyers and sellers agree that a sale should occur. It used to be that you could get a candy bar for a nickel. But if the underlying money supply begins to diminish, buyers become more cautious about how they spend their money and sellers have to work harder to persuade buyers to spend their money. Then a year later, you could get three candy bars for a dime. In a truly deflationary economy however, the money supply held by the public is so low that people simply have no money or refuse to spend what little they have and the sellers simply go out of business. A year after that, nobody had a dime. The unspoken phrase in this brief sentence is that there was nobody around to sell a candy bar, either. This was the Great Depression of 1929 in a nutshell and it's not for nothing that Ben Bernanke was selected to replace Alan Greenspan as chair of the Federal Reserve since Bernanke's theses had been about the then-Fed's errors in responding to the Depression. People lost their money and businesses lost control of prices as they engaged in bare-knuckle behavior in order to stay in business and more often than not, they went bankrupt.
So this new monthly Index level isn't as good of a thing as the Fed would like to see. It continues to illustrate the effect of the family's loss of income; for the average family, not only is their income less, but they are now forced to contend with competing demands for their income as other costs are off-loaded by corporations and the government onto their narrow shoulders. It also says something that despite the efforts of a central bank to inject trillions of dollars into the economy, so little has been accomplished for the family while so much has been accomplished for the uber-wealthy, the .01%. The grocers are taking multiple approaches to both maintain sales and keep things affordable for the consumer:
The takeaway is this. These changes aren't occurring because the grocers and producers are being kind to stretched consumers. They're happening because the grocers have to find a way to maintain sales in a population in which the money increasingly just isn't there. And that is deflation.
And now for the past six months of results. Note: There was an error in last month's table for the June results and I have corrected this in this table. The correct figures were reported in last month's text but the numbers were listed incorrectly in the table. This did not, however, alter the fact that the Total Index for June 2016 did breach the original index floor of 100 for that month.
|Month||Total Index||Food-Only Index||Spread|
ARTICLES BY CATEGORY
Basics for Dads
- Back to the Beginning…What is the point of raising a child?
- Volunteering: When Did I Become That Cub Scout Guy?
- Redefining Fatherhood - A Response
- A PracticalDad Look at Concussions
- The Virus Cocktail
- Kids and Pot: Discussing the Long-Term Effects
- Driving Up the Cost of Higher Ed: Bette and the New Educational Baseline
- Driving Up the Cost of Higher Ed: Globalization and the Knowledge-Based Economy
- The Cost of Higher Ed: “How in the Hell Did This Happen?”
- The Kids Are Paying Attention
- If it’s not about me, then who is it about?
- Keeping in Touch as Kids Age
Dad and Mom
- Cancelling Christmas? Yeah, I’m Down With That…
- Is Embarrassment a Disciplinary Tool?
- Controlling Your Kids
- PracticalDad Price Index - September 2016: The Potemkin Village Shelves
- PracticalDad Price Index - August 2016
- PracticalDad Price Index - July 2016: Confirming Deflation
Family / Personal Economics
- PracticalDad Slang: Of Opies, Forcepushing and Duckpecking
- If You Give A Mouse A Cookie, v. 2
- PracticalDad Physics
- Playing With The Kids: How Badly Do I Want To Win?
- PracticalDad Solutions: Uniform Hooks
- “Do I Have To Go?” Taking the Kids Along
- Dystopia Comes Home
- When School Technology Programs Affect Family Policy
- When Does the Academic Push Become Too Much?