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Here's How to Monitor Daily Price Fluctuations of 5 Million Items

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There is a lot of hand-wringing among both professional investors and politicians about the potential inflationary impact of all this unconventional monetary policy.

For instance, Bill “Bond King” Gross had this to say in his latest commentary: “Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme.”

Sarah Palin has also weighed in, telling the Fox Business Network that quantitative easing will result in a weaker greenback and rising prices: “If the Fed starts printing money out of thin air…our dollar will be devalued,” she said.

Given all this headline-making worry, the web site created by two MIT professors of economics seems timely and appropriate: The Billion Prices Project.

This academic initiative, explain the profs, collects prices from hundreds of online retailers around the world on a daily basis to conduct economic research. Specifically, they monitor daily price fluctuations of 5 million items sold by 300 online retailers in more than 70 countries.

BPP Database Key Facts:

-Statistics updated every day
-5 million individual items
-70 countries
-Started in October of 2007
-Supermarkets, electronics, apparel, furniture, real estate, and more

Data is collected every day from online retailers using software that scans the underlying code in public webpages and stores the relevant price information in a database. The resulting dataset contains daily prices on the full population of products sold by individual retailers, allowing the professors to observe every single price change that takes place. Data includes information on product descriptions, package sizes, brands, special characteristics (e.g. “organic”), and whether the item is on sale or price control. (Hat tip: Carpe Diem)

The chart below shows daily price indexes for the U.S. from July 1, 2008 through November 15, 2010, comparing the BPP Index to the Consumer Price Index:

POSITION:  No positions in stocks mentioned.