Anecdotal measures of inflation

The Nomad Lawyer (Paul Lukacs) notes the following in his web posting:

When I visited Hong Kong in December 2010, the cost of one Mrs. Fields cookie was 11 Hong Kong dollars (US$1.43).

In early spring, the price rose to 11.5 Hong Kong dollars (US$1.49).

This week, the price rose to 12 Hong Kong dollars (US$1.56).

That’s a lot for a small cookie.

Applying some Canadian grade 11 math, the compounded annualized rate for the 8 months of price change is the following:

exp(ln(1+[{1.56 – 1.43} / 1.43]) / [8/12]) = 13.94%

Ouch!

I find these anecdotal measures of inflation to be more realistic than government-released statistics. Although the US Dollar has depreciated about 7% against the world basket of currencies, increases in sugar and flour prices (derived from wheat) have also skyrocketed.

Inflation, whether the US government reports it in its statistics or not, will be the only politically practical way the they can ever pay off its mammoth debt. There are too many entrenched interests to allow other options at present. The result is the currency depreciating, which will increase commodity prices (as they are US dollar-linked). This depreciation also highly affects the competitiveness of Canadian exports to the USA, but also gives net importers (such as most consumers) higher purchasing power – most cross-border shoppers know this.

My own personal anecdotal explorations of inflation are usually at the supermarket. I notice a jug of homogenized milk (albeit protected by the BC Dairy Board in the province I live in) is about $4.50 for 4 litres. Bread costs are creeping up at around the $2.70-$2.80 level for a 680 gram loaf (although you can still find cheaper options). Coffee has skyrocketed on a per pound basis. I also notice those concentrate juice mixes in the freezer section have been downsized in volume but still sell for roughly the same price. There are signs of inflation everywhere similar to Mrs. Fields Cookies that was noticed by the Nomad Lawyer.