Again, I get the theory. The question is the practice. How, concretely, does the iPad's processor being faster cancel out food costs? Do you buy 3% less of an iPad? Do you save the time from its faster responses to work extra hours? (Er, well, except, even that doesn't work because the faster processor is canceled out by the updated app being hungrier...)
So, to rephrase the point one other way, can you walk me through a scenario in which someone "came out even" because iPad speed went up as much as their food prices (with adjustment for value weight etc)? If you can't, then we're basically in agreement.
Yes, the Fed should treat differently-caused price drops differently. Velocity-related deflation is not the same as technological deflation, and central banks should be more concerned with the former.
If some miracle technology makes clothes require half the inputs, the Fed should not take it as a signal to debase the dollar that much more to accelerate spending, so yeah, if they're thinking inflation is low because there was iPad technological deflation, that does sound very much like "doing it wrong". Why do you disagree?
So, to rephrase the point one other way, can you walk me through a scenario in which someone "came out even" because iPad speed went up as much as their food prices (with adjustment for value weight etc)? If you can't, then we're basically in agreement.
Yes, the Fed should treat differently-caused price drops differently. Velocity-related deflation is not the same as technological deflation, and central banks should be more concerned with the former.
If some miracle technology makes clothes require half the inputs, the Fed should not take it as a signal to debase the dollar that much more to accelerate spending, so yeah, if they're thinking inflation is low because there was iPad technological deflation, that does sound very much like "doing it wrong". Why do you disagree?