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And look for knock-on virus effects such as frenetic follow up discussions about the potential for quantitative easing, and reasons for why the stock market does whatever it ends up doing tomorrow. It's alive and its mutating!

Thanks for the heads up. I typically ignore headlines like that anyways, but thanks! I've mentioned your post on my blog too.

I feel compelled to point out the Globe already has an article out on just this subject.



As if any more proof of money illusion was needed!

(just in case it's not clear, yes I know the phenomenon here (mistaking cpi changes driven by oil prices for core cpi changes) is not the same as 'money illusion' (mistaking nominal changes for real changes) just that the mechanism of people acting 'irrationally' with respect to numbers even when theoretically you might expect them to know better is the same)

From Statscan:

"The Bank of Canada's core index advanced 1.9% over the 12 months to June, following a 2.0% rise in May.
The seasonally adjusted monthly core index increased 0.2% from May to June, after a 0.3% rise from April to May."

Now, if I remember correctly, weren't you complaining about a month or two back, Stephen, that StatsCan didn't publish the seasonally adjusted core CPI? Maybe they are reading WCI!

And with those numbers released today, plus the Bank of Canada recent survey that shows most businesses now expect inflation between 1% and 3% (fewer expected below target inflation, or deflation, than in the previous survey), I am now a lot less worried about the threat of deflation than I was a few months back.

(Just to be more precise, it is not deflation that worried me, but expected deflation, though, of course, either one eventually leads to the other.)

Reading this post, I am reminded of an interview with Allan Meltzer regarding deflation and he pointed out that few in financial journalism seem to realize that there is a distinct difference between a decline in the price level and deflation.

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