Like most things that people need to live, coffee has gone up these last few years. Even after a big decline in the last 18 months, the commodity still costs about three times what it did ten years ago.
If you read Zero Hedge, you may have seen a recent item from Daily Finance on declining coffee quality. It seems that the brand producers have lately been swapping in the cheaper Robusta beans for the better-tasting Arabica.
“Why should I care?”, you ask. Because this is a good little example of inflation at work. Many things have gone up a lot, in the last 10 years. But the coffee makers don’t want to ask people to pay (much) more. They figure, people will settle for Robusta, a worse taste.
So, retail coffee prices rise don’t rise (as much as the commodity has). Then the government elves who compile the consumer inflation statistics say: Look, the consumer price isn’t rising! Whee, no inflation! If you say “But Robusta isn’t as good”, they say: It’s a change in consumer preferences! Not inflation!
Except… it was inflation. Declining quality – the substitution of inferior goods, for roughly the same money – means a lower living standard. That’s one form of inflation; especially if it keeps happening.