Current inflation doesn't ..

Discussion in 'Economy' started by zonly1, Mar 9, 2012.

  1. zonly1
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    zonly1 Probie still throwin'em

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    count energy and food. As gas goes up, no rocket science, so does the cost of process foods including field grown crops and orchards and of course dryland farming, manufactured goods and services..tnc.
     
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    Last edited: Mar 9, 2012
  2. DSGE
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    DSGE VIP Member

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    That's a lie.

    Common Misconceptions about the Consumer Price Index: Questions and Answers

    "Has the BLS removed food or energy prices in its official measure of inflation?

    No. The BLS publishes thousands of CPI indexes each month, including the headline All Items CPI for All Urban Consumers (CPI-U) and the CPI-U for All Items Less Food and Energy. The latter series, widely referred to as the "core" CPI, is closely watched by many economic analysts and policymakers under the belief that food and energy prices are volatile and are subject to price shocks that cannot be damped through monetary policy. However, all consumer goods and services, including food and energy, are represented in the headline CPI.

    Most importantly, none of the prominent legislated uses of the CPI excludes food and energy. Social security and federal retirement benefits are updated each year for inflation by the All Items CPI for Urban Wage Earners and Clerical Workers (CPI-W). Individual income tax parameters and Treasury Inflation-Protected Securities (TIPS) returns are based on the All Items CPI-U.
    "
     
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  3. editec
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    editec Mr. Forgot-it-All

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    I find that my personal expeience and the CPI seldom jibe.

    That is, I suspect the experience of most Americans.

    So if the CPI is an accurate picture of the consumer expeience, I don't know who those consumers are.

    Certainly it isn't my experience or that of anybody else I know.
     
  4. DSGE
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    DSGE VIP Member

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    Your perception isn't exactly a good indicator of what's happening in reality. It's prone to all sorts of involuntary biases. If you've actually taken the time to define your basket of consumer goods and recorded all of their prices every week and formed an index which you could compare to the CPI, then there'd be some degree of rigor such claims.
     
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  5. buddy_boy8403
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    buddy_boy8403 Rookie

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    Yeah - It's a little ridiculous that the Fed says inflation is only 2 percent a year... my milk, gas and bread have gone up way more than that. The average American sees about a 9 percent inflation rate. My pay hasn't increased that much though! It's sad when I actually was able to save more 10 years ago than I can now even though I've gotten raises over the years. Just goes to show you how much inflation can really hurt the middle class. Damn fiat money and intentional debasing of the U.S. dollar.
     
  6. DSGE
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    DSGE VIP Member

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    Well that's bullshit. Inflation at 9% per year means that over a period of ten years prices increase by a factor of 2.37. Do you honestly think everything is over twice as expensive as it was ten years ago? Fair enough for energy, right. But, I don't know, maybe it's conceivable that a highly demanded globally traded commodity like oil might undergo price shocks not caused by monetary policy? I like that everybody perceives much more inflation than there actually is but nobody bothers with an actual data.

    From the 2012 Statistical Abstract: The average price of white bread in 2000 was $0.99. The average price in 2010 was $1.39. So that's an annual bread-inflation rate of about 3.5%

    The average price of a gallon of fresh whole milk in 2000 was $2.79. In 2010 it was $3.32. That's an annual milk-inflation rate of about 1.8%.

    Your 9% figure is full of shit.

    Well that was your first hint that your figure was off. Either there have been massive supply shocks to everything causing their price to rise 9% without corresponding increases in wages, or your guess is wrong. One of the best estimates for the money supply-induced inflation rate is the rate of wage inflation. That is, how quickly your wages are going up.
     
  7. editec
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    editec Mr. Forgot-it-All

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    I essantially buy the same products week after week.

    The problem as I see it is this...

    The CPIs basket of goods is screwed up.

    The CPIs basket of goods doesn't really reflect the same basket of goods that most people typically buy on a regular basis.

    There really ought to be multiple CPI rates.

    Each CPI number would better reflect the pattern of buying of the various CLASSES of consumers.

    For instance the basket of goods for the very poor would mostly entirely include food shelter and clothing and pretty much NOTHING else.

    The basket of goods for the upperclass consumers would reflect the sorts of goods that they purchase.

    Those two baskets are very different, so one CPI cannot actually reflect the INFLATION experience of the different consumer classes.

    You see my point, DSGE?


    a 5% increse in the privce of gas and oil, for example, impact the lower class' CPI much much differently than they impact the upper classes,

    Why?

    Because the nature of the percentage of their incomes going to BUY those goods is very different.

    You understand the math, I am sure.

    So the question isn't:

    Is the CPI real?

    instead the question is:

    For whom, is the CPI real?

    My answer is that it isn't really real for MOST Americans.

    For most Americans the CPI is sytematically UNDERSTATED.
     
    Last edited: Mar 10, 2012
  8. DSGE
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    DSGE VIP Member

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    Absolutely. The BLS admit as such on their CPI FAQ. At some point they ran experimental indexes for the elderly and the poor. If I recall, they didn't get updated much because collecting the data on different sub-population's spending patterns was too expensive or something. But I understand and agree with that point.

    I don't agree with this bit though. The CPI-U estimates a price index for the average urban consumer.
     
  9. editec
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    editec Mr. Forgot-it-All

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  10. pinqy
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    pinqy Gold Member

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    For several reasons. Collection would become more difficult if you add in rural areas. Already hundreds of BLS employees physically visit stores every month to collect prices. Adding in a larger area to cover, including longer travel times and time to collect would involve substantial costs.

    And not just collection area, but the number of outlets...while the current sample size is fine for a National city average, it's not adequate for multiple sub groups. One of the reasons the CPI-E has remained experimental is the sub sample of eldery is small enough that the EPI loses a lot of accuracy.

    To expand to rural areas and to have large enough sub-samples to adequately represent the smaller groups would be a large cost in adding people to collect and travel expenses. That's not even talking about the possibility of needing more analysts in DC to cover the increased sample size. And given the short amount of time (3 weeks) to compile the multiple indexes already in existence, you'd run into problems of timeliness as well.

    The main reason the CPI will never match an individual's experience is that the CPI is an AVERAGE of all urban consumers. The weights are set for average expenditures and that's hardly going to match personal experience. My child care costs are much more of my budget than their weight in the CPI. And the CPI has to include some big ticket items, like cars, computers, appliances, that people don't buy every month....but every month someone buys them, so that's part of average price changes.
     
    Last edited: Mar 12, 2012

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