This is the Cato Daily Podcast for Thursday, July 17th, 2008.

I'm Caleb Brown.

Core inflation is an old standby to measure inflation, but it does not include key components of how we spend our

dollars today like energy. The illusions created by core inflation may also have

helped inflate the rapidly deflating housing bubble.

So says Cato Institute Senior Fellow, Jerry Odriscoll.

Basically, detail in a few minutes.

What is your problem with core inflation? is your problem with core inflation

but my problem with core inflation

is it excludes the products that the ordinary consumer buys every day

food and energy and which he really or she really cannot avoid buying every day

and overweight goods which are bought infrequently and epithetically so that it systematically understates the real inflation that

ordinary consumers face in their day-to-day lives.

Now what's the argument for leaving energy and food out of this you know major

measure of inflation? Well it goes back to the to the 1970s and the oil price

shocks and then

to uh... you know to some uh... weather related events with agriculture which of

course is reminiscent what's going on today

and either what are called supply shocks and they weren't necessarily recurring.

We have two big oil shocks in the 70s separated by years and that was viewed correctly as a one-time

increase in the price level

and they didn't want that

...