Inflation Index: Real Estate vs. the Dollar

Currencies are adjusted based on the inflation of a country. The higher the inflation, the lower a country’s currency moves. However, the way inflation is measured from one country to another country is not the same. Some countries use Wholesale Price Index, others use Consumer Price Index. The index itself is composed of commodities and things that differ from country to country.

However, if inflation is about the cost of living, it should also include the cost of real estate.

With home prices going substantially down in the U.S. (whereas they are in bubble zones in the Asian economies of India/China), the cost of home purchase is becoming cheaper. Even inflation in commodities is lower in the U.S. compared to other countries.

Should it not have pressure on the US dollar to move up compared to Asian currencies?

Comments

[User 6666:]

Real Estate should be included in inflation but it would be disingeneous to do so at this point. You can't count it on the way down if you didn't count it on the way up. Inflation from 2000-2007 would have averaged around 8% yearly had you done so. Instead, the gov't cherry-picked what to count to minimize the figure. Switching the procedure to whatever minimizes the figure *now* would be a whole new level of cherry picking.

2008 Aug 27 10:08 AM