Bill G. has it right

Bill has it exactly right.

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2004/IO_Oct_2004.htm
http://www.pimco.com/LeftNav/HomePageAnnouncements/IO+Con+job+redux+04.htm

Part II is especially rich although his analogy is off in my opinion. The price of a bag has risen but the time the bag lasts has increased. However, if the same analogy was applied to cars I think it works better. Say I want the world's most basic car. 10 years ago that was a vehicle with four wheels, engine etc and seatbelts. Now it has all that plus airbags and ABS brakes on two wheels. Those adjustments are taken out of the price when figuring inflation however the car doesn't last any longer and my cost of transportation has risen.

Rock on Bill, rock on!