“In the end, Everything’s gonna be alright. If it’s not alright, then it is not the end”
Thanks Bob for the partial quote.
With this action they are trying to fool people but when it becomes so evident it means that they are on a shortage of moves left. We are not looking at a technical move, but mere marketing strategy.
CPI (Consumer Price Index) is an Index that gathers the price change of a various group of goods on a 2-year basis. The CPI then, tells you how much more (or less) money is needed to face the same cost as two years before. It's then a reference on how much the people's purchasing power has changed.
With this new action, CPI is going to be calculated on the simple last year and with this new parameters you can easily bet that inflation rates are getting back again under usual thresholds.
Are you asking yourself why?
Well, inflation started rising since mid2021 so inflation now, is still covering the beginning of 2021 where inflation was not yet so bad.
Let’s make some simple calculation, thanks to this free tool: https://www.bls.gov/data/inflation_calculator.htm
I will assume a cost of 1000$ in December 2020 and the same cost in December 2021 and see as of December 2022 what is the equivalent money required to have the same buying power.
This first scenario represents an inflation of 13.9% in two years. That’s quite a lot.
Here inflation is at 6.4% in one year. Quite high but not as dramatic as the previous data. Besides, inflation can raise above standards for one year but making the comparison on a two years basis will make the inflation staying above certain thresholds for much longer and can make people get used to the new stationary state.
The new stationary state includes the fact that on a one year basis you can have 6% inflation from the previous year. The following year you will may have an 8% absolute value that becomes a simple 2%, since the value will be calculated on the last year basis. 8% is dramatic since it will be a continuative and lasting high inflation, while 2% is below alarm thresholds.
In this way, thanks to a change of parameters people will be more relaxed of still paying dramatic inflation that will be presented as a beneficial parameter.
This happening recalls very well to me the Kansas City Move. You will be pointed your attention right (inflation data) while they go left (changing the Inflation Index). Thanks “Slevin” for the inspiration.
So in conclusion:
2022 CPI have been calculated on 2019 and 2020 years.
2023 will be calculated on just 2021 year.
I am ready to bet that 2023 inflation data will not be so bad while companies and people will keep suffering the purchasing power shortage.
What's your opinion on this matter?
In the meanwhile, let’s chill with the Bob’s song
