You know how nobody (except the vast majority of Americans) considers inflation a problem? How inflation is under control, and doesn't even exist, and wouldn't be a threat if it did exist, and in fact needs to be even higher?
This kind of sophisticated economic theory is hard for ordinary mortals to understand because our money has only lost 10.9 percent of its value over the course of the worst recession since World War II. (Does it really need to be pointed out that in times of economic stagnation prices are supposed to go down, not up?)
It's also hard because so many distracted shoppers miss an important mechanism for increasing price: reducing the portion size and charging about the same amount. A while back I noted this phenomenon in describing how ice cream underwent stealth inflation late in the Bush Administration, when the venerable half-gallon container was disappeared and replaced with 1.5-quart and 1.75-quart lookalikes.
Here's an even more obvious price-up. While New York Mayor Michael Bloomberg has been waging war against bigger serving sizes, one of America's most beloved portions – the venerable 64-ounce carton of orange juice – has been downsized by 12.8 percent. And it happened more than two years ago.
I'm chagrined not to have noticed this swindle for so long. All those hours of stalking supermarkets in a simmering rage of price checks, only to miss an obvious one like this! Nor is this a challenge that can be solved through the mythical "substitution effect." This now-standard 59-ounce container is full of Florida's Natural – which in my experience is the cheaper alternative to Tropicana and Minute Maid. (Maybe I should switch to SunnyD? Does the PCE basket consider that an OJ equivalent?)
Last year New York Fed President William Dudley stirred up a wave of ridicule by noting that the price of an iPad had not risen. That one's still good for a few chuckles, but it does reveal something about how your betters think. Bernankenomics will afford you the rare privilege of staying exactly where you are right now, as long as you can go without eating anything or drinking anything. In fact, do yourself a favor and don't check the price of anything either.