Forget Everything You Know About Inflation
If you’re over 50 and managing your investments for retirement, you may want to forget everything you know about inflation.
There’s a growing school of thought that the financial economic conditions of your youth were an aberration in American history.
Since peaking in February 1975, inflation has been in decline.
The inflation benchmark shown is pegged against the personal consumption expenditure deflator, which is used by the Federal Reserve in setting interest-rate policy.
After topping 10% in February 1975, inflation plunged in 1976 and soared again in January 1981, and then began its steady 44 year descent.
In continuing to drop since the last expansion, inflation is turning conventional economic wisdom on its head.
Wages are rising but it’s not causing higher inflation, challenging economic models used by the Fed to fulfill its dual mandate to promote job growth and control inflation.
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