COMMENTARY ON CHAPTER
Americans are getting stronger. Twenty years ago, it took two
people to carry ten dollars’ worth of groceries. Today, a five-
year-old can do it.
—Henny YoungmanInflation? Who cares about that?
After all, the annual rise in the cost of goods and services averaged
less than 2.2% between 1997 and 2002—and economists believe
that even that rock-bottom rate may be overstated.^1 (Think, for
instance, of how the prices of computers and home electronics have
plummeted—and how the quality of many goods has risen, meaning
that consumers are getting better value for their money.) In recent
years, the true rate of inflation in the United States has probably run
around 1% annually—an increase so infinitesimal that many pundits
have proclaimed that “inflation is dead.”^258(^1) The U.S. Bureau of Labor Statistics, which calculates the Consumer Price
Index that measures inflation, maintains a comprehensive and helpful web-
site at http://www.bls.gov/cpi/home.htm.
(^2) For a lively discussion of the “inflation is dead” scenario, see http://www.pbs.
org/newshour/bb/economy/july-dec97/inflation_12-16.html. In 1996, the
Boskin Commission, a group of economists asked by the government to
investigate whether the official rate of inflation is accurate, estimated that it
has been overstated, often by nearly two percentage points per year. For the
commission’s report, see http://www.ssa.gov/history/reports/boskinrpt.html. Many
investment experts now feel that deflation, or falling prices, is an even
greater threat than inflation; the best way to hedge against that risk is by
including bonds as a permanent component of your portfolio. (See the com-
mentary on Chapter 4.)