“I See…”, said the Blind Man
October 4, 2020
I’ve spent a lot of time lately observing the events that are going on around me very carefully. Since my business is business I’ve become particularly fascinated with economic theory. I’ve been into that since college but kind of in the background. I took the freshman classes like everyone else but only cared so far as it was being able to explain what I saw on television news. Not the loftiest of goals but at the time, that was the level of my interest. That was many years ago, life experience has taken that interest to all new levels. At least in my own imagination.
Throughout my own up and down career I’ve subconsciously kept in the back of my mind, so this is what Jonathan Carr and Milten Friedman were talking about. And slowly but surely I could start to see why “statistics” and “indicators” and “benchmarks” are so important..why the “economy” is so important. So much of our individual lives depend on it almost for life itself. This is pretty ominous when you think about it and it also explains a lot. It can easily explain why we treat others as we do, behave and the way we do and believe what we believe. I personally don’t believe any economic model can predict anything remotely useful if there are no “human” elements involved, i.e., humankind’s quirky, excessive and completely irrational side that defies any algorithm.
But still, you can see things coming if you just take a look. I’ve been wondering with all money that being printed out there, I ask two questions:
- Why isn’t any of it coming to me?
- Where’s the inflation that usually comes along with it?
Well, I can’t answer the first question, but I think I can take a shot at the second. Take a close look at the illustration above. It is a screenshot from the US Bureau of statistics Consumer Price Index for August 2020. (https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category.htm#)
Simply put, the things above are what the prices were on what people bought in August neatly broken up into “All Items”, “Food”, and “Energy”. For now we’ll forego the “All items except food and energy”. I have been shopping for a lot of food since covid, like everyone else and noticed a sharp rise in prices over the last 6 months. Isn’t that inflation? Yes, but it’s well within the acceptable 1% – 2% range which is the government’s actual goal. So all that extra money stimulating the economy doesn’t seem to be doing much damage.
But what I didn’t know at first, wasn’t clear until I looked at “Energy” on this graph, it was literally a picture painting a thousand words. Now it all made sense. Now I knew what was really going and I don’t have to be an economist to see it. Basically, gas is still “cheap”.., unbelievably cheap, cheap enough where we can carry on our daily lives, whatever that means to you. To me it means going to the grocery store to constantly buy more food. And just in the nick of time. Next question, is low energy costs the future? How long will it last. What are the benefits. What are the consequences. Again more questions. You gotta love economics!
