I've been thinking about CPI today (yes, I lead a thrilling life). Let's look at the chart again. This time, take a look at the red line (which is CPI including food and energy costs) and the blue line (which does not include these volatile elements:
There is all kinds of talk (and news reports, and windbag congressmen) who complain that "real" inflation is higher because our energy costs are skyrocketing. Putting aside for a moment that people in the US still pay less for gas than most people in the world, consider that the red line and the blue line on that chart are not really that far apart.
What does that mean?
It means that "real" inflation, which would include increases in food and energy costs, is not really too different than core inflation. It's another case of much-ado-about-nothing. The bigger story is, in my opinion, the story about what wages have been doing over this period of time.
