At 5:28 PM 12/27/96, Robert Cherry wrote: > In Jim Devine's communication on the COJL, he recopies a summary from the >BLS Report: > >" [T]he last time the jobless rate sank as low as it is > today -- in the late 1980s -- wage increases and inflation > accelerated, forcing the Fed to raise interest rates in 1988 > and early 1989 to cool off the economy." > > > Inflation accelerated ONLY if the CPI is used. When inflation is measured >for the entire economy -- either using the implicit price deflator or core >inflation (which eliminates energy and raw food price changes) -- there is >virtually no change between 1988 and 1989 and no rise for 1990." > > 1983 1984 1985 1986 1987 1988 1989 1990 > CPI 3.2 4.3 3.6 1.9 3.6 4.1 4.8 5.4 > Price Deflator 4.1 4.4 3.7 2.6 3.2 3.9 4.3 4.2 > > Thus, the FED responded in 1989 and 1990 to financial interests which >are tied to the CPI and not to any clear underlying evidence that there was >an accelerating inflation rate. Hmm, but the 1989 price deflator was 1.7 points above the 1986 one - not as sharp a rise as the CPI, but still a 65% spike in the inflation rate. Not that that's alarming to me, but it is/was to creditors. "Core" inflation is analytically useful, of course, but if we're talking about the buying power of money, you can't strip away the elements that tell you what you don't want to hear. Thatcher did that with the RPI for entirely reprehensible reasons, no? Doug -- Doug Henwood Left Business Observer 250 W 85 St New York NY 10024-3217 USA +1-212-874-4020 voice +1-212-874-3137 fax email: <[EMAIL PROTECTED]> web: <http://www.panix.com/~dhenwood/LBO_home.html>
