The Biggest Commodity: The College Degree and Academic Inflation

Acedemic Inflation

The College Degree When we hear the term "valuable commodity" we might think about oil or gold. Yes, these are undoubtedly commodities (though their value has fluctuated over time), but many other less concrete objects are also considered commodities in our society today. A commodity is defined as "A raw material or primary agricultural product that can be bought and sold, such as copper or coffee." But the second definition is "a useful or valuable thing, such as water or time". Based on the second definition, one of the most valued commodities available in modern society is a college degree. While it may sound odd to refer to a diploma as a commodity, there's no denying that a college … [Read more...]

The US’s Education Bubble

By Doug Hornig and Alex Daley, Casey Research In the world of finance, there is always talk of bubbles – mortgage bubbles, tech stock bubbles, junk bond bubbles. But bubbles don’t develop only in financial markets. In recent years, there's been another one quietly inflating, not capturing the attention of most observers. It's an education bubble – just not the one of student debt that has graced the pages of the New York Times and so many other publications in recent months. The problem is not that we are overeducating ourselves as many would have you believe. Rather, it’s that we are spending a fortune to undereducate ourselves. The United States has always been a very educated … [Read more...]

How Does Inflation Affect You?

When people go the the grocery store and see ever higher prices they know how inflation affects them. But when they are feeling more philosophical they might reason that if all wages and prices increased at the same rate it would all balance out in the end right? Well theoretically yes but in reality it never works that way. Prices of various items all increase at different rates so some people are benefiting while others suffer. Those on fixed incomes suffer the most because the cost of things they are buying increases but their income stays the same. This is where COLA or "Cost Of Living Allowance" comes in it is an adjustment that is made to compensate for the increase in prices due … [Read more...]

Is a Stock Market Crash Inflationary or Deflationary?

Recently a subscriber asked me the question above, he gave quite correct arguments about how the stock market is "a zero sum game" in other words for every buyer there is a seller, so overall everything should stay in balance. But as I'm sure you know there are at least 3 ways to measure money supply M1, M2 and M3. Each one includes increasingly broad definitions. From just cash equivalents up to including all sorts of time deposits and Government debts. But what they don't include is stock valuations, however if the price of your stocks increases you feel richer and are more likely to spend money from your other accounts because you know if you need the money you can always sell your … [Read more...]

Credential Inflation: Bachelor’s Degree Not Enough

In today's tumultuous economic climate, when we hear the term "inflation" we think money and a failing economy our minds immediately turn to expenses, debt, and money woes. Rarely, however, do our minds turn to college degrees and job prospects. On July 22, 2011 Laura Pappano from The New York Times published an article titled The Master's as the New Bachelor's. Introducing into the public mindset the concept of "credential inflation" and "degree inflation", this article has caused quite the hoopla in the academic world and many a panic attack among 20 somethings throughout the country. Pappano suggests that there is a certain amount of credential inflation occurring throughout the job … [Read more...]

Inflation vs Consumer Price Index – Do you know the difference?

Many people are confused by the difference between Inflation and the Consumer Price Index. The Consumer Price Index is as its name implies an index, or “a number used to measure change”. The Consumer Price Index (CPI-U) The government chose an arbitrary date to be the base year and set that equal to 100. Currently that date is 1984. (Or more accurately the average of the years 1982-1984) previously the base year was 1967 (they change the base year every once in a while so you don't notice that there has been over 2000% inflation since the start).  See Cumulative Inflation Since 1913. Every month the Bureau of Labor Statistics (BLS) surveys prices around the country for a basket of … [Read more...]

What is Core Inflation and Why Doesn’t It Include Food and Energy?

I frequently receive this question in one form or another: Why doesn't the government consider food and energy, and just tracks core inflation? The core inflation rate is frequently quoted in the popular press and this gives the general public the impression that the "government" doesn't care about (or track) the rise in the prices of food and energy. Actually this isn't true.  The core inflation rate is simply a component of the overall inflation rate. It is used by economists because often seasonal factors will skew the inflation rate. For instance a drought might cause fruit crops to fail, causing fruit prices to rise. But this rise actually has nothing to do with inflation (i.e. … [Read more...]

What Is the Real Inflation Rate?

I recently received the following question: Please explain to me how my cost of living can increase by 10-15 percent, grocery bills, fuel, energy, clothing, etc. yet my income only increases about 2-3% which typically matches inflation.  I have talked to many people about this and a lot of folks feel the same way, how can inflation only be 2-3% when the cost of living keeps going up 4-5 times that number. I am a college student, but only in my first few years so please explain this in basic terms so that I may understand. Thank you tremendously, Jessica This is a common question-- often it is phrased as "What is the real inflation rate? Who do I believe?" … [Read more...]

Inflation, Oil and the Environment

I recently received a great question from a 6th Grader on Inflation, Gas Prices and the environment all rolled into one. It isn't often that 6th graders think about these issues so I would like to share my response with you... To whom it may concern, My name is Sam and I am a 6th grade student at (deleted) Middle School. I love traveling. Whenever I go places I see lots and lots of poverty. I think to myself why? Than I look ahead of me and see the outrage sky high prices for food, gas and many other things. You may be wondering why I’m telling you this .I’m doing a project on one of the things that you know a ton about. My subject is inflation of consumer and gas prices. As I think … [Read more...]