It is extremely difficult, even for experts, to predict or determine the correct inflation rates that befall the United States. Many citizens depend on the inflation gauge as a guiding factor in purchasing, investing, selling and other financial actions. However, past instances have indicated that the accepted inflation gauge is repeatedly faulty in determining correct rates.
It is first important to understand that the term ‘inflation’ refers to the increase in price for consumer goods, which in turns results in currency having a lesser value. This applies to products that, although they are not changed in quality, are suddenly priced higher. In the United States, the main inflation rate measurement tool is the CPI, or Consumer Price Index, which typically measures the inflation rates related to common goods and services purchased by individuals.
Many experts believe that the inflation gauges in place in the United States do not record an accurate measure of inflation rates. Their first argument is that this inflation gauge, while effective to some degree, does not always represent inflation throughout the country. Inflation can be higher or lower in certain areas of the U.S. depending on multiple factors, especially consumer demand. Inflation rates in Colorado, for example, are much different than those in New York – and in the past, inflation spikes have hit hard in areas that require certain sudden, expensive products – but other areas were unaffected.
Another issue is that inflation measurement only includes certain products. The priced items included in the inflation ‘basket’ do represent the most commonly purchased products in United States society, but not all. The scope of measurement is overwhelming as well. It may be easily determined that prices are inflating; however, the exact rate of inflation is a matter of debate. This is because products increase by different amounts in different areas at different times. Which amount increase can be used to represent the inflation rate?
The United States has experienced multiple problems with the inflation gauge in the past. Misrepresentations of a dramatically rising inflation have led consumers to purchase goods in large amounts, or sell goods overpriced. Low inflation rates have also misled consumers into poor economic decisions, such as they did just before the 1929 Stock Market Crash. Unfortunately, there are many proven flaws to the current inflation gauge in the United States, and buyers shouldn’t depend on the system’s inexact data.