Inflation Isn't Evenly Distributed: The Protected Are Fine, The Unprotected Are Impoverished Debt-Serfs

The Consumer Price Index (CPI) measure of inflation is bogus on a number of fronts, a reality I've covered a number of times: though the heavily gamed official CPI is under 2% for the past four years, the real rate is 7% to 12%, depending on whether you happen to live in locales with soaring rents/housing and healthcare costs.

The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016)

Revealing the Real Rate of Inflation Would Crash the System (August 3, 2016)

The Disaster of Inflation--For the Bottom 95% (October 28, 2016)

But the other reality is that inflation is not evenly distributed throughout the economy or populace: many people have little exposure to the crushing inflation of healthcare and higher education. For these people, inflation is a non-issue or a minor impact on their wealth, income and lifestyle.

Those fully exposed to the skyrocketing costs of healthcare insurance and higher education are being reduced to impoverished debt-serfs.

The key factor here that is missed in the official CPI is the relative size and impact of each cost input. Televisions, for example, have plummeted in price as LCD screens have become commoditized.

But how often does a household buy a new TV? Every four years? Every five years? And how big a difference does a $50 or $100 drop in the cost of a new TV make in their lifestyle?

Items that decline in price are modest slices of household budgets, while items that are soaring higher every year are big-ticket expenses that dominate household budgets. So a new TV drops in price by $100. If you buy a new TV every four years, that's $25 savings per year. Big Freakin' Deal: that deflationary price "bonus" means you can buy one extra pizza.

Meanwhile, households exposed to the actual cost of healthcare insurance are absorbing increases of $5,000 or more annually. $5,000 increases every year add up: $5,000 + $10,000 + $15,000 + $20,000 = $50,000 was extracted from the household budget over the four-year period.

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Disclosures: None.

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