The happenings "inside" the Wisconsin State Treasury and across the street at the State Capitol

Archive for September, 2011

The Economy and You #10: What Is Inflation?

Typically, when you ask someone what inflation is, they respond it is the rise in prices that makes my money worth less.  In most respects, this description can be considered fairly accurate.  Inflation is the increase in overall price level of goods and services in our economy.

 It is important to note that not all price increases constitutes inflation.  Prices of individual goods and services are determined by the supply and demand of the free market.  When prices of some goods rise while others fall, these are relative price changes.  Inflation occurs when there is an increase in the overall price level.  Therefore, a price increase of a specific good or service you buy does not indicate inflation. 

 Economists measure the overall price level by looking at all or a large number of goods and services in the economy.  There are two measures generally used to measure overall price levels.  The GDP Deflator measures the cost of goods and services produced in the economy relative to purchasing power.  This differs from the Consumer Price Index (CPI), in that the GDP Deflator is not based on a fixed basket of goods and services.  I will talk more about the Consumer Price Index in later articles.

 Because inflation is the increase in the overall level of prices, it is linked to money.  Some say, “Inflation is too many dollars chasing too few goods.” To better explain how this works, imagine a world that only has two goods: oranges picked from orange trees, and paper money printed by the government. In a year where there is a drought and oranges are scarce, we’d expect to see the price of oranges rise, as there will be quite a few dollars chasing very few oranges. Conversely, if there’s a record crop or oranges, we’d expect to see the price of oranges fall, as orange sellers will need to reduce their prices in order to sell all of their inventories.

 Just as the supply of oranges can rise or fall, so can the supply of money. If the government decides to print a lot of money, then dollars will become plentiful relative to oranges, just as in the drought situation. Thus inflation is caused by the amount of dollars rising relative to the amount of oranges.

 Therefore, inflation is caused by a combination of four factors:

  1. the money supply goes up
  2. the supply of other goods goes down
  3. the demand for money goes down
  4. the demand for other goods goes up

 Still, there is more to inflation.  There is “price inflation and monetary inflation.  Price inflation is when prices rise and it takes more money to buy the same item.  Monetary inflation is when the money supply has increased which usually results in price inflation.

 Money inflation is often seen as the government printing money (economics students may want to look up the related topic of seigniorage or inflation tax).  While theU.S.may not just print more money when needed, the federal government has tools available to increase the money supply.

 So to conclude, when the government increases the money supply faster than the quantity of goods increases we have inflation. Interestingly, as the supply of goods and services increase, the money supply has to increase as well or else price will actually decline.

 In my next article I will examine the widely used inflation index, the consumer price index (CPI), and how it is calculated and why there are different CPI estimates.


AJR 26 clears first hurdle

This afternoon, the Assembly Judiciary and Ethics Committee voted 6-2 to pass AJR 26, the Amendment to eliminate the offices of Secretary of State and State Treasurer from the constitution.

Voting Aye:

Representatiave Jim Ott (Chairman) (R-23)

Representative Tom Larson (Vice-Chair) (R-67)

Representative Samantha Kerkman (R-66)

Representative Andre Jacque (R-2)

Representative  David Craig (R-83)

Representative David Cullen (D-13)

Voting Nay:

Representative Gary Hebl (D-46)

Representative Anthony Staskunas (D-15)

The next step in the process is the scheduling of the legislation in the general Assembly. I will post an update as soon as this happens.

Search For Cash While Enjoying All Things Apple!

(Madison)       The State Treasurer’s Office will bring the Unclaimed Property Database to one ofNorthern Wisconsin’s biggest yearly events, the Bayfield Apple Festival. The Festival draws more than 50,000 visitors a year to a town that boasts a population of 600 people!

From Friday October 7th thru Sunday October 9th, anyone visiting the festival can search for cash they may have misplaced, forgotten about or didn’t even know they had! The Treasurer’s Office is holding more than $390 million.

The Unclaimed Property Tour this year has returned more than $750,000 to people we have visited across the State. From the State Fair in West Allis to the Northern Wisconsin State Fair in Chippewa Falls, we have met with thousands of people and helped them claim their cash. So far this year, the Treasurer’s Office has returned more than $24 million!

Stop by our booth in Downtown Bayfield and search for yourself, your family and your friends!



Unclaimed Property Tour

Bayfield Apple Festival

Bayfield, WI

Oct. 7-9, 2011


Elimination of Office reaches important juncture tomorrow.

At 11:00 A.M. tomorrow the Assembly Judiciary and Ethics Committee will hold an executive session in which they will vote on AJR 26, the bill to eliminate the Treasurer and Secretary of State, which I authored in March, and which was introduced by Assemblyman Scott Krug (R-72).

The committee, which is chaired by Assemblyman Jim Ott (R-23), is made up of 8 members. Should AJR 26 pass through the committee, it will go before the full Assembly.

Please join me in supporting this legislation, and let your Assemblymen know your feelings. The members of the committee are listed below:

Representatiave Jim Ott (Chairman) (R-23)

Representative Tom Larson (Vice-Chair) (R-67)

Representative Samantha Kerkman (R-66)

Representative Andre Jacque (R-2)

Representative  David Craig (R-83)

Representative Gary Hebl (D-46)

Representative Anthony Staskunas (D-15)

Representative David Cullen (D-13)

Testimony on AB 275

Yesterday, I explained my support for AB 275, which received a hearing today in the Assembly’s Urban and Local Affairs Committee. Today, I submitted written testimony to the committee.

Click here to read my testimony!

Representative Ed Brooks, Senator Dale Schultz, and BCPL Executive Secretay Tia Nelson all deserve to be commended for their work on this legislation.

Passing of Deputy Treasurer Peter Nelson

Deputy Treasurer Peter Nelson

It is with great sadness I report the passing of Peter Nelson.  Peter was Deputy Treasurer under State Treasurer Charlie Smith.  Peter served as Deputy until 1989 and was a committed public servant including spending time on the Stoughton City Council and Dane County Board of Supervisors.  Peter is survived by his wife and three children.  My thoughts and prayers go out to his wife and family.

Assembly Committee to discuss BCPL related bill, Treasurer to submit testimony.

Tomorrow morning, at 10 o’clock, I will be submitting written testimony in favor of AB 275 to the Assembly Committee on Urban and Local Affairs.  The legislation, which was authored by Representative Ed Brooks (R-50) and Senator Dale Schultz (R-17), has bi-partisan support, including 13 co-sponsors in the Assembly – 7 Republicans and 6 Democrats.

AB 275 allows the Board of Commissioners of Public Lands to make revenue obligation loans to municipalities in certain circumstances, in addition to the general obligation loans that the BCPL already makes. This means that if a municipality is undertaking certain revenue generating projects, such as sewer improvements, that municipality could back the loan with projected sewer revenue, as opposed to tax dollars. This allows communities an added flexibility in dealing with funding options for  improvements.

As a member of the BCPL, I am fully cognizant of how important it is that communities not default on the loans that come from the State Trust Fund Loan Program.  Since the BCPL started loaning through that program in 1871, there has not been a single default.  I support AB 275 because while it increases BCPL’s lending opportunities, it maintains safeguards that have protected us from defaults for 140 years.

By allowing the BCPL more safe loan opportunities, this bill has the potential to increase the Board’s contribution to the Common School Trust Fund. If we lend more money, we can achieve higher interest returns, and those interest returns end up going to public school libraries through the Common School Trust Fund.

AB 275 is good for BCPL, it’s good for public school libraries, and it’s good for community development.

Tomorrow, I will post the testimony that I submit to the committee.