Sunday, August 22, 2010

The Super-Flation Composite Index

Some say "inflation" is all about the money supply. Others insist it's a credit phenomenon. Then there's the establishment conception that equates inflation to the price of goods. And of course there is my personal preference to view inflation as a function of wages and income.

Here at Trend & Value we'll spare you the ridiculous debate on the definition of a word. Instead we'll just assume that each of the definitions mentioned above are partially correct. With such an assumption we can create a consolidated index that shows total inflation (or the lack thereof) over time.

Our Super-Flation Composite Index is the geometric average of the following 20 economic indicators available at the St. Louis Fed "FRED" site:

prices:

PPIIDC
PPILFE
PPIACO
CPIAUCNS
CPILFENS

money supplies:

M1NS
IMFNS
RMFNS
SAVINGNS
STDNS

credits:

NONREVNS
TOTALNS
REVOLNS
USGSEC
BUSLOANS

wages/income:

AHETPI
AHECONS
AHEMAN
PI
DSPI

Here's a chart of the index with a base value of 100 in 1974:



The next chart shows the annual percentage change of the index (AKA, "the inflation rate").



Wow, "the inflation rate" has been below zero (<0) for 11 months now. There's a word for that, I think.

Update: The spreadsheet now available on google docs. click here.