The newest inflation data is out, with a familiar spin.
Once again, we are told that it is easing, cooling, settling down, and generally less worrisome. So just relax.
Once again, the reality is different from the spin.
So much common language in economics is metaphorical and therefore imprecise. Even the word inflation itself is drawn from the Latin word inflare, which means to blow into, so one can imagine for example bellows on a fire or glass blowing.
Its original English usage embedded both the cause and effect: it was the money supply that was inflated thereby causing prices to rise. But sometime after World War Two, the word came to mean a rise in the general price level only, leaving out the causal element entirely. That led to vast confusion that persists today.
Even monthly reports of the Consumer Price Index (CPI) are subject to this metaphorical problem. The Bureau of Labor Statistics (BLS) reported that May’s inflation numbers were “unchanged” from the previous month. Drilling down into the index, however, reveals that restaurants, used cars, and shelter prices were all up 0.4 just in one month!
