Inflation Is How Much?

Although we discuss inflation in the textbook, we do not discuss how it is calculated. The inflation numbers from Ibbotson are based on the Consumer Price Index (CPI), although there are numerous other inflation measures. This results in the inevitable argument: So how much is inflation? Peter Schiff, found of Euro Pacific Capital, argues that the current measure of inflation is flawed and that inflation is substantially higher than that reported by the U.S. government. Interestingly, the article discusses a behavioral topic, the confirmation bias. As the author points out, people are likely to seek out and remember information that supports their argument and ignore or forget evidence to the contrary.