CPI isn’t perfect, but it’s more indicative of real world concerns of average person. I don’t care about gold, but I do care about goods accounted for in the CPI.
Just because a commodity is roughly fixed in amount and availability not as easily manipulated by making up numbers does not mean it has some magical absolute “value”. Value is always subjective and heavily based on context.
Offer me a bar of gold for everything in my pantry today? Sure thing, I know I can get a lot more money and refill my pantry. If you made that same offer, but people are disinterested in gold? No, because ultimately that bar is useless to me without the wider context of people willing to part with significant resources in exchange for the gold.
Modern monetary policy is as much about psychology as it is about math. Gaming the system so that, largely, people have a number that behaves predictably to general goods and services over time. In the great depression, the relative value of gold in real terms fluctuated wildly, and society exploded in no small part due to people’s feelings relative to the numbers despite the fundamentals not changing much between “things are going great” and “everything is ruined”.
CPI isn’t perfect, but it’s more indicative of real world concerns of average person. I don’t care about gold, but I do care about goods accounted for in the CPI.
Just because a commodity is roughly fixed in amount and availability not as easily manipulated by making up numbers does not mean it has some magical absolute “value”. Value is always subjective and heavily based on context.
Offer me a bar of gold for everything in my pantry today? Sure thing, I know I can get a lot more money and refill my pantry. If you made that same offer, but people are disinterested in gold? No, because ultimately that bar is useless to me without the wider context of people willing to part with significant resources in exchange for the gold.
Modern monetary policy is as much about psychology as it is about math. Gaming the system so that, largely, people have a number that behaves predictably to general goods and services over time. In the great depression, the relative value of gold in real terms fluctuated wildly, and society exploded in no small part due to people’s feelings relative to the numbers despite the fundamentals not changing much between “things are going great” and “everything is ruined”.