Incipient Inflation

stringquartetWhile the inflation rate is about 0%, the price of goods is falling at 3.3%/year while services inflation is running at 2%/year. Goods are falling in price due to cheap imports, a strong dollar, excess capacity, and falling raw material prices. Services, like a haircut, cannot be imported and increases in the minimum wage impact service providers disproportionately. A string quartet can’t shrink to a trio to save money.

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