Here’s an interesting chart.
Why the poor can have "things" but can't escape poverty pic.twitter.com/nzE6f6ONLh
— Mark Mellman (@MarkMellman) May 4, 2014
The eurozone version of this is the debate about to what extent the relative increase in prices in southern Europe in the 2000s represented an increase in wage costs, and to what extent it represented wider inflation. I certainly remember a lot of concern about “mileuristas”, and of course the Greek version of living on €1,000 a month was living on €700 a month. The classic example is the fact that the CPI doesn’t include housing costs, and there was a housing bubble, dammit.
I used to be quite snarky about people who claimed there was really huge inflation because they saw someone selling this or that for so much and it wasn’t like that in my day. I am less so now. In a real sense, if inflation doesn’t include food or housing or healthcare or energy, is it a useful measurement?
So you might think I would be pleased at the content of this piece. But I’m very far from it. The reason is, basically, Piketty.
If you want r to get under g and stay there, inflation and financial-repression is a big part of the picture. And for this to be of any use, it has to be proper inflation – i.e. the sort that includes wages. You could make a case that the price stability the ECB achieved was actually more like “wage stability”. I wonder if prices expressed in terms of earnings is a measure we should monitor.