22 September 2018

Stable Prices, Household Finances, Real Estate Commissions

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Stable PricesRyan Avent examines the mystery of stable prices. “Why hasn’t there been deflation? That has been one of the central mysteries of the Great Recession and its aftermath. In the 1930s soaring unemployment led to galloping deflation. In the early 1980s a 4.5 percentage point increase in the unemployment rate came alongside a drop in the core inflation rate from about 12% to under 3%. American unemployment rose by more between 2007 and 2010. And yet core inflation dropped only a bit, from a little over 2% prior to the recession to a low of 0.6% in 2010. Inflation has since recovered to 2% despite continued high unemployment. The experience across the rich world has been broadly similar. On the face of things, the answer is simple: inflation did not fall by much because central banks did not want it to.”

Household Finances: Emily Oster says you’re probably doing your household budget all wrong. “Most people who want to know about household budgeting turn to someone like Dave Ramsey, who has a carefully crafted household budgeting system. His, like many others, relies on a simple idea—sometimes called the “envelope system”—where you put your gas money in one envelope , your grocery money in another, etc., and spend only within a category… The system works great, as long as nothing ever changes. But the minute that some price changes, you’re in trouble. Here’s an extreme example.

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