Yes, we have no inflation!

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machinehead's picture
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Joined: Mar 18 2008
Posts: 1077
Yes, we have no inflation!

Although governments may be in fiscal distress, unlike private sector businesses, they don't seem to conduct any distress sales. The prices of government services, whether the CPI is low or high, change in only one direction: up. Here are two examples, one from North America and one from Europe.

WASHINGTON (AP) -- The post office wants to increase the price of a stamp by 2 cents to 46 cents starting in January. The agency has been battered by massive losses and declining mail volume and faces a financial crisis. The request now goes to the independent Postal Rate Commission which has 90 days to respond. If approved, the increase would take effect Jan. 2.

The current 44-cent first-class rate took effect May 11, 2009.

Annualized, the postage rate increase is about 2.8%. By contrast, the U.S. CPI rose 2.0% over the past 12 months.

Now let's move to Germany ... err, maybe not:

July 6 (Bloomberg) -- Chancellor Angela Merkel’s coalition backed higher health-insurance premiums, a move some critics from her own party said will fail to curb rising health-care costs and might undermine the German economic recovery.

Coalition leaders meeting in Berlin today agreed to raise health premiums to 15.5 percent of gross pay from 14.9 percent, Health Minister Philipp Roeslersaid. Employers will contribute 7.3 percent with 8.2 percent paid by employees.

However excessive health insurance premiums in the U.S. may be, they are at least fixed prices. If it costs $10,000 a year to insure a family, then that's the price, regardless of how much you make. Under the German system, if I'm correctly understanding the Bloomberg article, it's all just progressive taxation. If you make €200,000 a year, you'll end up paying a stunning €31,000 a year for health coverage. [So-called 'employer contributions' can easily be demonstrated to be part of one's compensation package.]

Where is the incentive for cost control, when the health scheme not only gets revenue indexed to wages, but even increases its percentage rake-off from time to time? No wonder Europe's mixed-socialist economies are in trouble!

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