I think what they wanted is for the economy to not implode, with millions of people either dead to the virus, or newly homeless because they are broke.
Then they should have built a better safety net. Monetary policy just leads to consumer or asset price inflation, and the legislature did a very poor job with fiscal stimulus when it was most necessary (early in the pandemic). They just wrote blank checks to businesses and people. They could have done so much more (expanded SNAP benefits or more incentives for first time homebuyers, for example). Instead wealth inequality is higher than it was before the stimulus.
Could you please expand on how keeping interest rates artificially depressed, causing the prices of homes to skyrocket, advances the goal of preventing homelessness?
The price of homes skyrockets. The interest on loans craters. The monthly payments stay the same. This is because the demand curve on buying houses is sensitive to the monthly payment, not the total price. So it all evens out...
... until you need the down payment. Then the higher prices/lower interest rates combo locks people out. It especially locks out first-time buyers.
You don't become homeless when you can't afford to buy a house. You become homeless when you can't afford rent (or your regular fixed-rate mortgage payment).
Rent is largely divorced [1] from house prices, and is largely driven by the amount of money people have after they get their paycheck, and subtract bills, gas and groceries from it. In a tight market, your landlord will take everything that's left from you. In a loose market, your landlord will only be able to charge you maintenance + his mortgage interest payments.
The best way to create a lot of homeless people really quickly is to have renters stop going to work, causing them to miss rent payments. The various stimulus and unemployment benefits cause some amount of main street inflation (increases in the cost of a basket of goods), but have also kept people in their apartments.
[1] Home prices in many metro areas are skyrocketing at the moment, but rents are falling.
Anyone who has been to a supermarket in the last 12 months knows that the 2.6 percent increase in consumer prices is observably not true. I buy the same basket of the generic products ( chicken quarters, produce, beef, eggs, bacon, dairy products ) . Compared to this time in 2020 I'm spending at least 20% more. People who buy processed food(s) are spending at least 30% more.
Somehow everyone seems has this experience, rents have continued to climb at a high rate for the last decade, and they manage to downplay this in statistics.
The "basket of goods" they use to measure inflation is purposefully gamed to under represent purchases everyone makes weekly that are "volatile". But good news is that DVD players are cheaper than ever so inflation must be low!
Fuel, which isn't purchased as often since the pandemic started has maintained its CPI weighting and has gone down dramatically however.
Inflation is one of those things where if it's clearly stated as being extremely high can risk a lot of followon effects as everyone divests themselves of any direct monetary assets.
This is an obvious and simple explanation yes but I think it’s only part of the story. CPI numbers are brought down by considering a lot of non-essential goods while almost everything you actually need — food, shelter, healthcare in particular has gotten considerably more expensive. So the sentiment is exacerbated by the fact that nobody really cares whether TVs etc are getting cheaper in their day to day lives.
Given that there's been a massive shift in allocation of spending due to the pandemic I would take any claims like this with a now expensive grain of salt. Let's not forget at the start of the pandemic toilet paper was going for $1 a roll.
In 2011, my rent was $1,420 a month. In 2021 my rent is $1,610 a month. According to the published inflation numbers my rent has gone down because it should be $1,672 if accounting for inflation.
I don't live in California-- maybe things are different there-- but I don't buy the conspiracy theories about inflation numbers.
In 2009 my rent was $550 in Pittsburgh. I just looked and today the same unit is going for $980, a 78% increase. According to published inflation numbers that should be a 23.5% increase to $679 today. So at least from our two examples we can see the effect is not evenly distributed.
edit: incidentally, in 2009 the minimum wage was $7.25, and my rent would have been 47% of my gross income. Today the minimum wage is still $7.25 and if I had stayed at the same apartment at the same wage, my rent would be 84% of my gross income.
On average rents have doubled since 2006, but yes this varies from place to place. Not just in big cities though, it’s been in both cities & rural areas around me in Ohio as an example.
CPI isn’t “rigged”. CPI measures exactly what it measures and measures it transparently.
Whether you think it and it’s constituent parts are good metric for measuring inflation is a different conversation. But that doesn’t make it “rigged”.
CPI is rigged in the sense that it is one attribute that status quo-apologists trot out to say “nothing to see here” when the real cost of goods is observably higher for all but the ultra-wealthy. “It’s not hyperinflation, it’s just that everything you conceivably want to buy is coincidentally much more expensive, because [reasons].”
The Fed and U.S. government are rigging our economic system to backdoor tax the middle class while gaslighting all of us into thinking that this is normal.
You don’t print $10T and handwave away millennia of basic economic principles.
Help me understand how CPI is not a joke with respect to how it’s used to say “this is normal.”
Everything I’m interested in spending money on, new hires for my company, real estate, cars, computer hardware, food, lumber, gas. All of this is coincidentally more expensive sometimes by a factor of more than 2x from two years ago? Nope, not buying it.
But no one is “selling” you anything here. CPI is just data with a very public methodology. Some things go up, others go down. The Fed uses it as one input in decision making to manage inflation over long time horizons.
You can look at what is measured in CPI and how it’s measured. You can have a conversation about whether that’s the most precise way to measure inflation etc. but just waving your hands about your “lived experience” and making allusions to a conspiratorial “they” doesn’t pass for analysis.
Show your work. What is the motive here for the “Fed and U.S. government are rigging our economic system to backdoor tax the middle class while gaslighting all of us into thinking that this is normal”? How do they do it? What’s in it for them? I’m genuinely curious how you get there from looking at CPI.
CPI is the equivalent of the FBI investigating their own actions and finding no wrongdoing. You can wrap a turd up in gold foil and have it certified by a panel of experts, but it’s still shit.
There's a huge monetary incentive, since things like social security payments (the largest item in the federal budget) are inflation indexed. The Boskin Report [1], which argued that inflation was overstated by 1.1%, estimated that their proposed "corrections" would reduce the deficit by $202 billion by 2008.
The whole thing was rather suspicious in my opinion. The report was based on some questionable interpretations of inflation, and it seemed like the Senate appointed particular members in order to get the outcome they wanted, as Thomas Palley argued [2]:
> The commission is itself a delicious example of such bias: All its members were on record prior to the establishment of the commission as believing the CPI to be overstated. At the same time, the commission took no evidence from such well-known economists as Janet Norwood, a former head of the Bureau of Labor Statistics, and Dean Baker, of the Economic Policy Institute, who believe that the CPI provides a reasonable reading of inflation. In effect, the commission took account of all the evidence of overstatement of inflation by the CPI and downplayed the evidence of potential understatement.
Consider fake meat. A veggie burger used to cost a buck or so. Compare that to today’s beyond beef which is almost beyond beef in price. Hedonic adjustments in everything.
> The top 300 biggest cities in the US are home to only ~20% of the population.
I think it's actually 20% for the top 100 cities; but a total of 62.5% of the population actually live in cities (82% live in urban areas - due to increase to 89% by 2050)
> Prices for food at home increased 3.3 percent over the past 12 months. All six major grocery store food group prices advanced over the period, with increases ranging from 1.6 percent (dairy and related products) to 5.4 percent (meats, poultry, fish, and eggs). Prices for food away from home rose 3.7 percent, as the 6.5-percent advance in prices for limited services meals was the largest 12-month increase since data were first collected in 1997.
Doesn't quite fill your 20% claim, but 5.5% for meats and 6.5 for limited services meals (places where you primarily order at the counter/drive-through/online) is quite the bump!
I think he is asserting that the CPI is manipulated to the downside. Trying to refute his point with CPI numbers is like quoting Bible verses to an atheist.
That only happened if you managed to sign the lease during the dip. The rents started to appreciably drop last summer, this means that over the past 12 months only people whose leases expired between summer and now were able to lock in the savings. I, for example, was not that lucky. So I'm just not going to have a massive rent increase.
That's a period of like 10+ months. Peak rental season is usually in the summer too. Most people who were on 12 month leases would have had an opportunity to sign a new lease in this time. Even if they didn't, it's not like rents have recovered, you can still get far cheaper rent in many areas and will likely continue to be able to do for the next few months at least.
Where I live in the exurbs, rents are climbing and inventory is extremely low. But I wonder if that's going to change once the eviction moratoriums expire. People who can't pay a year's worth of deferred rent are going to have to move in with someone else as having a recent eviction makes it nearly impossible to rent again. That's going to mean less demand for a growing supply of rentals.
While we are dealing in anecdotes, I buy mostly processed foods and I can only think of a single food item I regularly purchase that has seen a price increase, and that was small and due to a change in the grocery store's suppliers. In fact, I have been seeing more sales recently on items I would purchase anyway which I think has dropped my food costs a bit.
Processed/packaged food/goods has another trick where they give you less but it seems like the same amount, and charge you the same, so you don't notice it as much. I bet you a lot of those things you're buying you're actually getting less than you were 1-2 years ago. They reduce the number of toilet roll sheets by 30-40, or the ounces in the package go down 3-4 oz, or they give you 1 less hot dog.
Here's a site that tracks the downsizing (I've also seen it called 'Shrinkflation'), and there are a lot of examples on the site. I'm sure you'll find something (probably multiple somethings) you buy on there that got downsized in the last year or two.
You are being downvoted but this is also my experience. My grocery bill is up more than 15% like for like (I shop exclusively online so it's easy to track) and more than that in total because of volume increases. My utility rates are up >10%. Housing costs are way up where I live. I would guess my overall baseline cost of living is up at least 10% when you remove the impact from lower commuting and eating out costs.
Precisely. There is manipulation across the board. Some of the packaging is getting really ridiculous. The argument that higher inflation would indicate that the economy has been contracting could be phrased differently: What if the "great slowdown" as per Peter Thiel is one in value, lack in progress, cheaper quality products, shaving off everywhere to retain a facade, pushing out real world goals and targets to future decades etc. This does not mean there won't be any progress or some obvious deflation (electronics, biotech). It's still an important discussion to be had (the effect of found monetary standards on the economy/technological progress. http://wtf1971.com/ and The Bitcoin Standard obviously have a different perspective on these reported inflation numbers.
Some non-CPI items like cars (new and used) and basic commodities like lumber have grown a lot more than 2.6%.
Correction: CPI does include new and used car prices, after a lot of adjustments, at 3.7% and 2.5%, respectively. It's important to note though that the median cost of cars sold has grown much faster than the CPI car numbers. This is because the BLS tries to account for car quality, so even though you're paying much more for a car, they can say car prices "per value" are flat.
Some anecdata from a neighbor who works for Lennar... The Lennar Corporation is still buying up property with plans to develop "in the future" but they are not going to be moving forward with most of their development plans for this year and next. She is actually worried about losing her job in the next 6 months because of the way things are moving in that world.
"A Honda Accord cost $12,000 in 1990 and it costs $25,000 now.
A Mustang was $9,000 and now it’s $27,000.
The BLS has new car prices close to unchanged over the past 30 years."
Whatever you think of the validity of "hedonic adjustments", this is certainly not what I would expect when BLS reports car prices as unchanged during that period.
I’d be wary of comparing models across such a long time period, car makers have a habit of gradually drifting up each model (because it’s hard to release a smaller/simpler model than the preceding one)
To take a European example, a 1990s VW golf is smaller and slower than a 2020 polo.
The Honda Accord of 1990 is a different class of vehicle than the Honda Accord of 2021. In 2021, there are other entry level vehicles that can be purchased for much less than an Accord.
Indeed. A 2021 Accord is far superior to a 1990 Rolls Royce or other ultraluxury car in terms of amenities, engine power, quietness, build quality, etc.
That’s not even mentioning the leaps and bounds in efficiency and safety. I’d argue cars have gotten effectively cheaper over the years, as they’ve dramatically improved in every respect. If you could still buy a 1990 Accord manufactured today, it would probably sell for a couple thousand dollars.
Edit: as for the Mustang example in the grandparent post, that $27,000 Mustang of today outperforms entry-level Ferraris of 1990. A fully-spec’d $80,000 Mustang of today would outperform every Ferrari from 1990, including the F40, which sold for $400,000 in 1990 dollars (~$800k in today’s dollars).
So if anything, the CPI doesn’t implement hedonic adjustments enough for cars.
Tangentially, wouldn't it be nice if we could buy a 1990-quality car for the inflation-adjusted price? Poor(ish) people would have a decent shot at actually affording reliable transportation and climbing up the ladder.
With the exception of a few brands (e.g. Honda, Toyota), I’m not sure the dismal mechanical quality of many 1990-quality cars would save people money versus buying a 10 year old used car for the same money.
Remember, 1990 is still the era of the 5 digit odometer. Cars have gotten hugely more reliable over the years. A 2010 car hitting 200k miles is routine and expected; a 1990 car hitting 200k miles would be exceptional.
Also, no 1990 car would pass modern safety standards. Few would pass emission standards. A big reason for the increase in engine performance (and thus complexity/cost) is due to the weight of all the safety equipment that’s required today.
This gives cart blanche to mark the price increases of each car year as hedonic adjustments. The BLS can simply say the price increase is due to enhancements. While some fraction of the increase is due to improvements, at least a portion is due to direct inflation.
Further, if the reality is that a 1990 equivalent car cannot be purchased today - then the consumer who could only afford the 1990 accord will instead buy used. Is this person going to feel wealthier than they did in 1990?
> The BLS can simply say the price increase is due to enhancements.
Hedonic regression actually quantifies the expected year-over-year price changes due to quality changes. It doesn’t give automakers carte blanche to increase prices, because a year-over-year price increase without quality increases commensurate with previous years will increase the residuals of the regression prediction for the current year.
> Is this person going to feel wealthier than they did in 1990?
Yes, because a 10 year old car in 2021 is still leaps and bounds better than a 1990 equivalent new car. Drive a few miles in a 2010 Civic (an entry level car), then drive a few miles in a 1990 Accord (a midrange car). You’ll be amazed at how much better the 10 year old Civic is in every aspect.
There are so many great cars from Toyota and Honda from that era, too. If only they kept making 1/2G LS/GS, Mk4 Supras, 1G Tacomas, NSX, S2000s, B18 Civics. Way to ruin my day (:D /s) by bringing up their current offerings.
I owned a 95 chevy truck until it hit 270k. My current vehicle is a 98 ford with 220k. Prior to that, I owned an 86 Saab with close to 300k. The odometers on all these had 6 digits. There may be statistics somewhere that say these are all outliers, but my experience has been that 90s vehicle are nowhere nearly as unreliable as you claim.
Cars from this era were far easier to work on than those made more recently. That's one reason I keep buying old. So it's not obvious that buying a newer car which is more difficult to fix, and may have to get taken to a mechanic or the dealer is a better deal than an older one which I can fix myself, even if the older vehicle needs fixing slightly more frequently.
Viewed this way, newer cars are both more expensive and provide worse value than cars from previous eras.
I hear what you're saying and I don't really disagree. But, at the risk of sounding like I'm not an environmentalist and I don't care about poor people, a new 1990s car today is still going to be better than a lot of what I see lower SES people driving today- if they're able to afford to drive anything.
You said it yourself: cars from the 1990s might last 100k miles! You think a poor person today is going to buy any used car that has 100k miles of life left? I highly doubt it.
As for the safety and emissions standards- you're right. That's a big part of what has driven up the price of cars. And while I know that they are less safe, were they really that unsafe? I mean, the 90s had airbags, seat belts, ABS brakes (at least some models). At the end of the day, I'm not saying I would be happy that a poor person could only afford the safety of a 1990s car. But what I am saying is that it's still better than what they have access to today. Ideally, we just wouldn't have people so poor that they can't afford safe transportation.
For emissions, specifically, I don't want poor people to have to pay the cost of saving our environment. I know a bunch of people who are financially comfortable enough to have multiple cars and/or recreational boats- let them pay for it. I'd be fine adjusting my wish to "1990s standards car + modern emissions standards, as long as the government subsidizes it such that it still would cost 1990s prices".
Dacia are doing exactly that in Europe. Simple cheap cars made from 10-20 year old Renault parts. Pretty reliable (because by the time they trickle down to Dacia, every component has been tested for several years by millions of Renault drivers) and insanely cheap
I think a very large number of people (myself included) would rather drive a 1990 Rolls Royce than a 2021 Accord, all else equal. I drove a 1990 BMW well into 2010 and I would very certainly take that car (in new condition) over a 2021 Accord today.
Whatever you think of the validity of "hedonic adjustments" doesn't really matter as far as cars are concerned because the BLS doesn't apply hedonic adjustments to car prices.
Aren’t “quality adjustments” by definition “hedonic adjustments”? How are these not hedonic adjustments? From the linked PDF:
“BLS adjusts for structural and engineering quality changes such as:
• Changes that affect the safety of occupants of the vehicle as mandated by legislated federal or state standards, and for purposes of IPP export items, applicable foreign market standards. Changes in safety features not required by legislated standards will be evaluated on a case-by-case basis.
• Changes in mechanical or electrical features that affect the overall operation or efficiency of the vehicle, or the ability of a component to perform its function, such as changes affecting steering, braking, stability, engine horsepower, traction control, transmission, battery life, and fuel systems and/or electrical systems.
• Changes in design or materials that affect the length of service, durability, need for repairs, or strength or performance of the item, such as stronger bumpers, HID headlamps, flexible body panels, platinum-tipped spark plugs, or warranty changes.
• Changes that affect comfort or convenience, if supported by evidence of a functional or software improvement, such as redesigned seat belts, remote door locks, theft deterrent systems, navigation and communication systems, satellite radio hardware, drive assist systems, backup cameras, sensors or changes in storage capacity.”
3. What items in the CPI are hedonically adjusted?
The CPI uses hedonic quality adjustments in item categories that tend to experience a high degree of quality change either due to seasonal changes, as in apparel items, or because of innovative improvements and technological changes, as in consumer appliances and electronics.
New and used car purchases (TA011 and TA021) use "Cost based adjustments"
What is the difference in methodology between “hedonic” and “cost based” adjustments? The site doesn’t say.
For all intents and purposes (i.e. going by the Wikipedia/intro to macroeconomics definition), any form of accounting for changing quality of goods in inflation indices is a “hedonic adjustment.” The BLS distinguishing between “hedonic adjustments” and “cost based adjustments” (the latter of which they do not define) seems to be something specific to them. And the PDF actually describing their methodology for adjusting car prices sure reads like textbook hedonic adjustment to me.
"Quality adjustments are based on costs provided by manufacturers in categories such as reliability, durability, safety, fuel economy, maneuverability, speed, acceleration/deceleration, carrying capacity, and comfort or convenience. Adjustments are also made when equipment is added or deleted from the tracked model. Adjustments are not made for changes in gasoline content due to mandated air quality requirements. Additional information is available in the Guidelines for Quality Adjustment of New Vehicles Prices document." (https://www.bls.gov/cpi/factsheets/new-vehicles.htm)
Cars, like homes, live in a debt market. I can't speak for the US but here in the UK more than 90% of new, private car registrations are supported by purchases made on finance[0].
High car and house prices are what you get when you have unprecedented close-to-zero interest rates for this long.
> I can't speak for the US but here in the UK more than 90% of new, private car registrations are supported by purchases made on finance
I would be wary of this statistic, because it could just mean that only people with leasing plans are buying new cars, and everyone else is buying the cars coming out of lease (which makes sense financially, a car loses something like 30% of its value in the first two years?)
The claim was incorrect. They are included. That's fundamentally different than claiming some kind of issue with how this information is calculated for cars.
The government has perverse incentives to keep it low and close to the same. The way the CPI is calculated has changed dozes of times in the last 30 years. Like you said, if you at food, healthcare, education, etc., they are up way more than 3% year over year.
The greater point is that the cost of essentials has skyrocketed but the effect is hidden in official inflation metrics because they include a large number of nonessential items such as utility-adjusted television prices.
Yeah, I can buy cheap 55 inch tvs for days. But my family's health insurance is still $36k/year (and regularly going up). I guess that can buy me about 75 55 inch tvs though, maybe I should spend it on that instead.
A large number perhaps, but the weight assigned to them is low. Food, housing, and transportation makes up 72.77% of the CPI, whereas televisions only make up 0.091% of the CPI.
The inflation has been tampered with quite a bit over the years. It's how you explain how the avg American is much poorer than his parents. I.e. in real terms, as in being able to buy: quality food, quality car, quality house (what? renting? no, not the same)
If those numbers were right coffee would be $25 a cup. I can understand thinking CPI understates things, but the math for average inflation of 6-10% for decades just doesn’t add up.
I replied to your other comment about Shadowstats, but will basically repeat the post:
They simply take the official BLS and add a constant. They say so themselves:
> Responding to prior criticisms made by economist James Hamilton, John Williams explained in a private phone call that Shadowstats does not actually recalculate BLS data, rather, the Shadowstats CPI merely adds a constant to the officially reported numbers.[25]
The number at that site will always be higher than the BLS number because the people who run that site simply think it should be higher so they make it higher in an arbitrary fashion. They publish no methodology to recreate their number or say why the x they add was chosen.
If you look at the graph their number and the official BLS number is always different by the exact same amount. And has been for years.
Whereas if you want to examine what BLS is doing you can download code:
Others are taking the risks of inflation much further. Stanley Druckenmiller noted that the current spending policy and fiscal policy of the US is threatening the Dollar's status as the world's reserve currency: https://www.cnbc.com/2021/05/11/stanley-druckenmiller-says-t...
> Note that Warren Buffet recently noted that his companies are seeing consistent increases in prices throughout the supply chain and will in turn need to raise prices:
This is a known phenomenon:
> Imagine an economy in which everyone expects inflation to be high for the foreseeable future (Americans of a certain age don’t have to imagine this; for a while, we lived in that economy). In such an economy, a company setting its prices for the next year will do so taking into account the likelihood that everyone else’s prices — the prices charged by competitors, the costs of raw materials, the wages offered by rival employers — will be going up over time.
> Reflecting this expectation, companies will mark prices up relative to what they would have been if they didn’t expect future inflation — and by so doing, will feed the very inflation they fear. In other words, once expectations of sustained inflation are embedded in the economy, inflation becomes self-perpetuating — and bringing it down can be extremely difficult. That’s what makes stagflation — inflation despite high unemployment — possible.
> The point, however, is that short-term fluctuations in volatile prices tell us little about whether stagflation is becoming a risk. That’s why Fed policy generally ignores the headline inflation rate and instead focuses on a measure that excludes food and energy prices.
> So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers.
This seems inline with what the fed wanted/expected. They are considering this transitionairy inflation, which is temporary, so don't expect this to affect borrowing rates or bond buying. At least not yet.
And this article is 7 years old, I can't imagine Perianne's reaction to the current M2 money supply of 20 trillion, almost double the 10 trillion when she wrote it in 2014.
> Oh lookie, someone has been calculating the numbers using the old methodology.
They have been doing no such thing. They have not put any effort into "calculating" anything. They simply take the official BLS and add a constant. They say so themselves:
> Responding to prior criticisms made by economist James Hamilton, John Williams explained in a private phone call that Shadowstats does not actually recalculate BLS data, rather, the Shadowstats CPI merely adds a constant to the officially reported numbers.[25]
The number at that site will always be higher than the BLS number because the people who run that site think it should be higher. They publish no methodology to recreate their number. Whereas if you want to look at what BLS is doing you can download code:
For anyone else wondering, like I was, this is a photo of copper wiring. I'm guessing thick gauge (6AWG) for dealing with high amperage. Not sure what the /3 signifies.
While amusing anecdata, your picture of a copper cable price is an indication of not much:
> Well, booming economies often run into temporary bottlenecks, which show up in surging prices for selected goods. For example, the price of copper tripled between December 2008 and February 2011, even though recovery from the 2008 recession was fairly sluggish.
It does make for a somber website visit, when one frequents the Chapwood Index and starts contemplating about all of it including the consequences for the poorest of the poor, who are trapped: https://www.reddit.com/r/PersonalFinanceCanada/comments/kr1k... (the original site seems to be down at the moment)
This is complete and utter non-sense and engaging some simple math skills shows why:
> But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year.
> If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years.
> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[fn2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.
> This is absurd and patently false but that’s the claim you’re making if you really think inflation is this high.
If inflation is >10% as Chapwood claims, but growth was only 2-3%, then that would mean there was >7% deflation in real terms. If we had really deflation that big the economy would be collapsing à la the Great Depression.
To repeat the key line:
> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year, that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.
Is it really inflation or higher prices due to higher than normal demand? When the demand goes up the market clearing prices naturally increase (until more efficient suppliers join the game)
Higher prices due to demand outpacing supply is one of the three types of inflation. The other two being based on cost of production increasing and build-in (everyone expects it, so it becomes true).
We don't see any big CPI increase caused by quantitative easing. Wealthy people don't increase their food quality/need. I assume there's some effect of stimulus checks since most of them went to the 90% poorest Americans. Without, we'd might even see deflation.
What I took from that article is that inflation, as so many things in economics, is however you define it.
I wonder what the outcome of the growing split between poor and rich will be.
In other news, the chocolate ration has been increased to 25 grams! Great success!
/s
Anybody living in the world can tell you that consumer prices are up a lot, lot more than 2.6%. Look even at this very thread. Food prices are way up, lumber prices are way up, restaurant prices are way up, clothing costs are up. Lots of goods literally just seem unbuyable at this point. Even in my city (nowhere near the southeast) people are now lining up to buy gas, which is also at the highest price it has been in almost 8 years.
Bullshit CPI is up 2.6%. Don't give me that propaganda number.
God damnit stuff like that is so insulting. People, real actual human being are suffering right now. It's practically evil to put out obviously gaslighting bullshit statistics like this as if they're crazy to notice that literally everything in their life has gotten more expensive.
"When a measure becomes a target, it ceases to be a good measure."
>Anybody living in the world can tell you that consumer prices are up a lot, lot more than 2.6%. Look even at this very thread. Food prices are way up, lumber prices are way up, restaurant prices are way up, clothing costs are up.
who knew that if you cherrypick from a list of items rather than using a broad basket, you can get arbitrarily higher/lower averages?
Yes and no. If these (e.g., food) are the things most people consume most of the time that's not cherry picking. Furthermore, consumer perception does matter. It does have impact - even if it's misperception.
Gas is up. That's naturally going to increase cost of nearly everything that depends on that mode of transportation. Certainly, that's directly or indirectly just about everything.
All of that sounds like the availability heuristic in play. You buy groceries and fill up your car every week, but those two only make up 15.157% and 2.875% of the CPI respectively. If those went up 100% and everything stayed the same, you might conclude that inflation is 80-100%, even though the CPI would only be up 18%.
Oil is still under $70 a barrel though. It's gone up since being at some historical very low prices but compared to the times it's been north of $100, especially if you factor for 2021 dollars.
Doesn't California also require custom blends for its gasoline, which also tends to make it more expensive? My understanding is that only refineries in California make them, which prevents out-of-state gasoline from being imported to help supply quickly match increases in demand.
I would reckon that airline fares are down because of the pandemic -- people don't want to fly because they are afraid of getting infected, and that's causing a "deflation" in ticket prices.
But by that measure, everything is up or down because of the pandemic. A lot of the inflation we are seeing is because of supply chain issues specifically caused by the pandemic. For example, lumber is only because they closed down mills, and chips are short because companies cancelled a ton of orders, etc. I myself went on a trip because plane tickets are so damn cheap right now.
But I do agree that we are in a period of very high inflation.
For anyone else out there thinking of traveling, the flights are cheap until you start having to do all the associated covid testing to even enter other countries. After that, it’s actually a very expensive time to fly. (Especially if the location only allows certain test facilities - $400+ per test adds up) Tests to get on the plane, tests after you land, tests some days after you land, tests before you leave... The flights are “cheaper” but the total cost definitely isn’t.
I went to Hawaii recently. We got first class tickets for around $600. A single test for $150 was required to go to Hawaii, but no test was required after that. And we didn't need to test before returning back to California.
The most expensive part actualy is car rentals. Car rentals in Maui are insanely expensive, if you can even get a rental. One of my friends was quoted $900/day. In other islands like Big Island and Oahu, they are cheaper ($50-80/day) if you can find a deal.
One thing they do to keep CPI low is using "equivalent items".
So if the iPhone 4 cost $500 ten years ago, and you can now buy an "equivalent" cheap Android from WalMart for $50 then they measure this as deflation.
And that's fine right? 13 years ago an enthusiast-class graphics card went for $300[1]. Now it costs $650[2] (more if you include scalpers). Does that mean PC gaming hardware has inflated by 2x?
They will say your 13 year old HD 4750 costs next to nothing these days. They compare like specs now with those last year, so technological progress is counted as deflation.
> Food prices are way up, lumber prices are way up, restaurant prices are way up, clothing costs are up.
As was predicted:
> So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers.
> The question will be whether these price increases are a 2010-2011-type blip or something more dangerous. Smart observers will look past the headlines to measures of underlying inflation — not just the Fed’s standard “core” measure but things like the Atlanta Fed’s sticky price index as well. Anecdotal evidence, otherwise known as “talking to people,” will also be important: Are businesses actually starting to set prices and wages based on the expectation of high future inflation?
> If they aren’t — and my bet is that they won’t be — then the lesson of 2010-2011 will remain: Don’t panic.
> Now as then there are people eager to denounce government attempts to help the economy. And it’s certainly possible that the American Rescue Plan will turn out, in retrospect, to have been too much of a good thing. But don’t let the usual suspects seize on a few months’ inflation data as evidence of looming disaster.
I don't how old you are, but we went through the same thing ten years ago:
> Well, booming economies often run into temporary bottlenecks, which show up in surging prices for selected goods. For example, the price of copper tripled between December 2008 and February 2011, even though recovery from the 2008 recession was fairly sluggish.
If you look up the inflation rate 2008-2011 you'll find it was nothing to write home about.
Will it actually be a problem this time around? It certainly can, and people are concerned about it. They're paying attention to it. But we had 3% inflation in the 1990s and the world didn't end.
Perceptions of prices are up more than prices are.
I did some grocery shopping for my parents the other day. Three tomatoes, three green peppers, a half gallon of milk, one bunch of bananas, and a soup bread. "Give me a twenty(USD)," I said. "No way, prices are higher than that," said my dad. "Take two."
They are doing everything they can to inflate. They have basically spent over 20 trillion in the last 2 decades fighting deflation and have little to show for it. The reckoning is coming and there is nothing they can do to stop it. Over half of employable Americans will be without work, corporations will require less and less people. Every industry and every corner of the economy will feel it. We are probably no more than a decade or two away from chaos if the Government doesn't take steps now to address the issue that Technology is eating the world.
I have never seen anything like this in manufacturing. Steel prices are double if you can find it at all. Plastic molders are operating under force majeure due to TX weather a few months back. Electronic assembly parts are in short supply and some, such as STM32 processors are almost impossible to find (such as variant for brushless controllers). One wire forming vendor we have worked with for over 20yrs cancelled our POs and said they can't even discuss when they might be able to work with us again because they don't have labour or raw materials.
The damage being done in manufacturing right now dwarfs anything from last year.
The problem with printing money by governments is that every dollar printed means the value of that money is spread thinner and thinner. That means you need more of those thinner dollars to make up the value. It's like watering down the beer. You'll need to drink more glasses of that weaker beer to get the same effect.
Every government gets away with printing money for a very short time, then the Zimbabwe Effect takes over. It will happen in the US just like it happened in the Confederacy. IIRC, in 1865 one silver dollar cost sixty paper dollars in exchange.
In Germany in 1923, one wheelbarrow-load of Weimar Deutchmarks could buy you a loaf of bread.
Like the crack in the bridge over the Mississippi, the actual time can't be predicted. But that crack (amongst the thousands of other bridge problems) was certainly expected, and no surprise when it finally happened. A country is no different from a house. If you don't keep up the maintenance, things will definitely break sooner or later. The US's infrastructure has been lacking maintenance for decades.
Many talk about the financial problems like the acrobat spinning lots of plates on sticks. He's having problems keeping them going, and those plates are getting wobblier and wobblier.
If I have to make a prediction, I'd say in the next 5 years or so. So don't take on too much debt for you to handle, and start prepping for very difficult times.
The key similarity in all those situations was a loss of productive capacity.
The Confederate currency wasn't backed by any assets, so it lost value as their defeat became more likely. Apparently, it lost 20% of it's value after the battle of Gettysburg.
Zimbabwe's government seized the land of white farmers and gave them to people who lacked farming knowledge and experience. Predictably, their output cratered, sparking the hyperinflationary spiral.
Germany lost a huge amount of it's productive capabilities due to the Treaty of Versailles. Keynes wrote a fantastic book (The Economic Consequences of Peace) that lays the economic case for why the Treaty would be a disaster. Germany basically had much of its land, equipment, and other assets seized while also being saddled with significant war debts. They were effectively forced into hyperinflation by the structure of the treaty.
The key similarity in all those situations was a loss of productive capacity.
And the US production figures have gone where in the last 40 years? In 1980 the US was the world's biggest creditor nation. By 1988 the US was the world'd biggest debtor nation.
The debt and deficit have only grown larger since then.
194 comments
[ 4.3 ms ] story [ 188 ms ] thread... until you need the down payment. Then the higher prices/lower interest rates combo locks people out. It especially locks out first-time buyers.
Rent is largely divorced [1] from house prices, and is largely driven by the amount of money people have after they get their paycheck, and subtract bills, gas and groceries from it. In a tight market, your landlord will take everything that's left from you. In a loose market, your landlord will only be able to charge you maintenance + his mortgage interest payments.
The best way to create a lot of homeless people really quickly is to have renters stop going to work, causing them to miss rent payments. The various stimulus and unemployment benefits cause some amount of main street inflation (increases in the cost of a basket of goods), but have also kept people in their apartments.
[1] Home prices in many metro areas are skyrocketing at the moment, but rents are falling.
* https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
Inflation is one of those things where if it's clearly stated as being extremely high can risk a lot of followon effects as everyone divests themselves of any direct monetary assets.
presentation bias is everywhere.
I don't live in California-- maybe things are different there-- but I don't buy the conspiracy theories about inflation numbers.
edit: incidentally, in 2009 the minimum wage was $7.25, and my rent would have been 47% of my gross income. Today the minimum wage is still $7.25 and if I had stayed at the same apartment at the same wage, my rent would be 84% of my gross income.
Learn more about the calculation here: https://www.bls.gov/news.release/archives/cpi_04132021.htm
If you think it is a fair indication, I have a bridge to sell to you
Whether you think it and it’s constituent parts are good metric for measuring inflation is a different conversation. But that doesn’t make it “rigged”.
I don’t get how anecdotal evidence trumps repeatedly buying and measuring the cost of a vast cross section of products everyday people consume?
Help me understand the conspiracy here? Who is doing the rigging and how?
You don’t print $10T and handwave away millennia of basic economic principles.
Help me understand how CPI is not a joke with respect to how it’s used to say “this is normal.”
Everything I’m interested in spending money on, new hires for my company, real estate, cars, computer hardware, food, lumber, gas. All of this is coincidentally more expensive sometimes by a factor of more than 2x from two years ago? Nope, not buying it.
You can look at what is measured in CPI and how it’s measured. You can have a conversation about whether that’s the most precise way to measure inflation etc. but just waving your hands about your “lived experience” and making allusions to a conspiratorial “they” doesn’t pass for analysis.
Show your work. What is the motive here for the “Fed and U.S. government are rigging our economic system to backdoor tax the middle class while gaslighting all of us into thinking that this is normal”? How do they do it? What’s in it for them? I’m genuinely curious how you get there from looking at CPI.
There's a huge monetary incentive, since things like social security payments (the largest item in the federal budget) are inflation indexed. The Boskin Report [1], which argued that inflation was overstated by 1.1%, estimated that their proposed "corrections" would reduce the deficit by $202 billion by 2008.
The whole thing was rather suspicious in my opinion. The report was based on some questionable interpretations of inflation, and it seemed like the Senate appointed particular members in order to get the outcome they wanted, as Thomas Palley argued [2]:
> The commission is itself a delicious example of such bias: All its members were on record prior to the establishment of the commission as believing the CPI to be overstated. At the same time, the commission took no evidence from such well-known economists as Janet Norwood, a former head of the Bureau of Labor Statistics, and Dean Baker, of the Economic Policy Institute, who believe that the CPI provides a reasonable reading of inflation. In effect, the commission took account of all the evidence of overstatement of inflation by the CPI and downplayed the evidence of potential understatement.
[1] https://www.ssa.gov/history/reports/boskinrpt.html
[2] https://www.theatlantic.com/magazine/archive/1997/04/how-to-...
https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...
[1] https://www.bls.gov/news.release/cpi.t02.htm
Well, yeah. Nobody is trying to hide this fact.
> gas
https://www.gasbuddy.com/charts
> food
Check the BLS data. In the short term, some food is def up, but less than 5%
Over the long term, it's down.
> cars
Down over the long term. Up in the last year.
> computer hardware
Yeah new hardware is gonna be expensive due to that whole chip shortage thing
> lumber
lol yeah all that lumber you're spending your money on
The only thing that's up by a factor of 2x is lumber, and I'm gonna bet that's only on your list because of all the headlines it's making.
Flank steak went from $8.99/lb to $12/lb NY Strip, from $10.99 to $14.99 Fillet Mignon from $18.99 to $24.99
Chick has gone up the same.
For many food items, inflation is 10% - 15% or more
HN doesn't live in "America" - we live in a bunch of different cities with different economies.
This is actually a key problem with the Fed's tools -- they're national in scale. Inflation can be low in Acron, OH, but very high in San Francisco.
I think it's actually 20% for the top 100 cities; but a total of 62.5% of the population actually live in cities (82% live in urban areas - due to increase to 89% by 2050)
https://www.nationalpopularvote.com/100-biggest-cities-have-...
> Prices for food at home increased 3.3 percent over the past 12 months. All six major grocery store food group prices advanced over the period, with increases ranging from 1.6 percent (dairy and related products) to 5.4 percent (meats, poultry, fish, and eggs). Prices for food away from home rose 3.7 percent, as the 6.5-percent advance in prices for limited services meals was the largest 12-month increase since data were first collected in 1997.
Doesn't quite fill your 20% claim, but 5.5% for meats and 6.5 for limited services meals (places where you primarily order at the counter/drive-through/online) is quite the bump!
I can't speak for you, but I pay a lot more for rent, than I do for groceries.
Here's a site that tracks the downsizing (I've also seen it called 'Shrinkflation'), and there are a lot of examples on the site. I'm sure you'll find something (probably multiple somethings) you buy on there that got downsized in the last year or two.
https://www.mouseprint.org/category/downsiz/
The top one on there shows they reduced Dorito's bags from 9 3/4 oz to 9 1/4 oz....sneaky sneaky!
Correction: CPI does include new and used car prices, after a lot of adjustments, at 3.7% and 2.5%, respectively. It's important to note though that the median cost of cars sold has grown much faster than the CPI car numbers. This is because the BLS tries to account for car quality, so even though you're paying much more for a car, they can say car prices "per value" are flat.
I know a small developer trying to build townhouses and he's unable to source the lumber needed at any price.
There's still an oversupply of trees, and (unfortunately) tree farmers have not seen any increase in price for the raw lumber.
Similar things happened with the meat processing plants and food/vegetable packaging.
That explains what's going on.
https://www.bls.gov/cpi/factsheets/new-vehicles.htm
"A Honda Accord cost $12,000 in 1990 and it costs $25,000 now.
A Mustang was $9,000 and now it’s $27,000.
The BLS has new car prices close to unchanged over the past 30 years."
Whatever you think of the validity of "hedonic adjustments", this is certainly not what I would expect when BLS reports car prices as unchanged during that period.
To take a European example, a 1990s VW golf is smaller and slower than a 2020 polo.
That’s not even mentioning the leaps and bounds in efficiency and safety. I’d argue cars have gotten effectively cheaper over the years, as they’ve dramatically improved in every respect. If you could still buy a 1990 Accord manufactured today, it would probably sell for a couple thousand dollars.
Edit: as for the Mustang example in the grandparent post, that $27,000 Mustang of today outperforms entry-level Ferraris of 1990. A fully-spec’d $80,000 Mustang of today would outperform every Ferrari from 1990, including the F40, which sold for $400,000 in 1990 dollars (~$800k in today’s dollars).
So if anything, the CPI doesn’t implement hedonic adjustments enough for cars.
Remember, 1990 is still the era of the 5 digit odometer. Cars have gotten hugely more reliable over the years. A 2010 car hitting 200k miles is routine and expected; a 1990 car hitting 200k miles would be exceptional.
Also, no 1990 car would pass modern safety standards. Few would pass emission standards. A big reason for the increase in engine performance (and thus complexity/cost) is due to the weight of all the safety equipment that’s required today.
Further, if the reality is that a 1990 equivalent car cannot be purchased today - then the consumer who could only afford the 1990 accord will instead buy used. Is this person going to feel wealthier than they did in 1990?
Hedonic regression actually quantifies the expected year-over-year price changes due to quality changes. It doesn’t give automakers carte blanche to increase prices, because a year-over-year price increase without quality increases commensurate with previous years will increase the residuals of the regression prediction for the current year.
> Is this person going to feel wealthier than they did in 1990?
Yes, because a 10 year old car in 2021 is still leaps and bounds better than a 1990 equivalent new car. Drive a few miles in a 2010 Civic (an entry level car), then drive a few miles in a 1990 Accord (a midrange car). You’ll be amazed at how much better the 10 year old Civic is in every aspect.
Cars from this era were far easier to work on than those made more recently. That's one reason I keep buying old. So it's not obvious that buying a newer car which is more difficult to fix, and may have to get taken to a mechanic or the dealer is a better deal than an older one which I can fix myself, even if the older vehicle needs fixing slightly more frequently.
Viewed this way, newer cars are both more expensive and provide worse value than cars from previous eras.
You said it yourself: cars from the 1990s might last 100k miles! You think a poor person today is going to buy any used car that has 100k miles of life left? I highly doubt it.
As for the safety and emissions standards- you're right. That's a big part of what has driven up the price of cars. And while I know that they are less safe, were they really that unsafe? I mean, the 90s had airbags, seat belts, ABS brakes (at least some models). At the end of the day, I'm not saying I would be happy that a poor person could only afford the safety of a 1990s car. But what I am saying is that it's still better than what they have access to today. Ideally, we just wouldn't have people so poor that they can't afford safe transportation.
For emissions, specifically, I don't want poor people to have to pay the cost of saving our environment. I know a bunch of people who are financially comfortable enough to have multiple cars and/or recreational boats- let them pay for it. I'd be fine adjusting my wish to "1990s standards car + modern emissions standards, as long as the government subsidizes it such that it still would cost 1990s prices".
Why stop at the 90s, lets look at the early 19th century. The early Model T was $20k inflation adjusted. A modern car would have been millions.
For some goods like cars and electronics, yes. For other goods and services (e.g. education, healthcare, childcare), no.
Have a look here to see which goods’ prices have inflated, and which have deflated: https://cdn.howmuch.net/articles/price-changes-in-usa-in-pas...
“BLS adjusts for structural and engineering quality changes such as:
• Changes that affect the safety of occupants of the vehicle as mandated by legislated federal or state standards, and for purposes of IPP export items, applicable foreign market standards. Changes in safety features not required by legislated standards will be evaluated on a case-by-case basis.
• Changes in mechanical or electrical features that affect the overall operation or efficiency of the vehicle, or the ability of a component to perform its function, such as changes affecting steering, braking, stability, engine horsepower, traction control, transmission, battery life, and fuel systems and/or electrical systems.
• Changes in design or materials that affect the length of service, durability, need for repairs, or strength or performance of the item, such as stronger bumpers, HID headlamps, flexible body panels, platinum-tipped spark plugs, or warranty changes.
• Changes that affect comfort or convenience, if supported by evidence of a functional or software improvement, such as redesigned seat belts, remote door locks, theft deterrent systems, navigation and communication systems, satellite radio hardware, drive assist systems, backup cameras, sensors or changes in storage capacity.”
https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
New and used car purchases (TA011 and TA021) use "Cost based adjustments"https://www.bls.gov/cpi/quality-adjustment/home.htm
For all intents and purposes (i.e. going by the Wikipedia/intro to macroeconomics definition), any form of accounting for changing quality of goods in inflation indices is a “hedonic adjustment.” The BLS distinguishing between “hedonic adjustments” and “cost based adjustments” (the latter of which they do not define) seems to be something specific to them. And the PDF actually describing their methodology for adjusting car prices sure reads like textbook hedonic adjustment to me.
The Guidelines for Quality Adjustment of New Vehicle Prices are at https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf.
New Vehicle CPI has increased 22% since 1990 (https://data.bls.gov/pdq/SurveyOutputServlet).
High car and house prices are what you get when you have unprecedented close-to-zero interest rates for this long.
Prices = f(interest rates, affordability)
[0] https://www.fla.org.uk/media/facts-and-figures/
I would be wary of this statistic, because it could just mean that only people with leasing plans are buying new cars, and everyone else is buying the cars coming out of lease (which makes sense financially, a car loses something like 30% of its value in the first two years?)
But deceptive things should be doubted.
That's how averages work
I like this website as it uses the older methodology which has been twice updated it seems: http://www.shadowstats.com/alternate_data/inflation-charts
Ironic considering that the reason cars have gotten more expensive was because their quality increased.
>quality house
They've gotten bigger over the decades, better equipped, and the monthly payments have actually gone down
https://awealthofcommonsense.com/2021/03/what-if-housing-pri...
Bigger isn't better. Better equipped? Sure, maybe.
When I look at the new homes under construction today (or over the past few decades), they're shit. They have more floor space, and that's about all.
Can you elaborate on this? How are they "shit"? Bad build quality? Tacky design?
They simply take the official BLS and add a constant. They say so themselves:
> Responding to prior criticisms made by economist James Hamilton, John Williams explained in a private phone call that Shadowstats does not actually recalculate BLS data, rather, the Shadowstats CPI merely adds a constant to the officially reported numbers.[25]
* https://en.wikipedia.org/wiki/Shadowstats.com
The number at that site will always be higher than the BLS number because the people who run that site simply think it should be higher so they make it higher in an arbitrary fashion. They publish no methodology to recreate their number or say why the x they add was chosen.
If you look at the graph their number and the official BLS number is always different by the exact same amount. And has been for years.
Whereas if you want to examine what BLS is doing you can download code:
* https://en.wikipedia.org/wiki/MIT_Billion_Prices_project
Others are taking the risks of inflation much further. Stanley Druckenmiller noted that the current spending policy and fiscal policy of the US is threatening the Dollar's status as the world's reserve currency: https://www.cnbc.com/2021/05/11/stanley-druckenmiller-says-t...
This is a known phenomenon:
> Imagine an economy in which everyone expects inflation to be high for the foreseeable future (Americans of a certain age don’t have to imagine this; for a while, we lived in that economy). In such an economy, a company setting its prices for the next year will do so taking into account the likelihood that everyone else’s prices — the prices charged by competitors, the costs of raw materials, the wages offered by rival employers — will be going up over time.
> Reflecting this expectation, companies will mark prices up relative to what they would have been if they didn’t expect future inflation — and by so doing, will feed the very inflation they fear. In other words, once expectations of sustained inflation are embedded in the economy, inflation becomes self-perpetuating — and bringing it down can be extremely difficult. That’s what makes stagflation — inflation despite high unemployment — possible.
> The point, however, is that short-term fluctuations in volatile prices tell us little about whether stagflation is becoming a risk. That’s why Fed policy generally ignores the headline inflation rate and instead focuses on a measure that excludes food and energy prices.
> So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers.
* https://www.nytimes.com/2021/03/22/opinion/us-inflation-stim...
* https://archive.is/Vxj5h
It can become dangerous (see 1970s), but economists have a decent understanding of it nowadays, and so can be factored into decision making.
My latest sticker shock was at Lowe's.-
https://imgur.com/a/9UoXNdk
https://www.forbes.com/sites/perianneboring/2014/02/03/if-yo... with-the-cpi/
And this article is 7 years old, I can't imagine Perianne's reaction to the current M2 money supply of 20 trillion, almost double the 10 trillion when she wrote it in 2014.
https://fred.stlouisfed.org/series/M2SL
Seems like yet another example of Goodhart's Law. "When a measure becomes a target, it ceases to be a good measure."
I own many homes, I see their value go up much more than 2.6%. Yes anecdotal but it is very obvious to anyone that has tried to buy anything recently.
http://www.shadowstats.com/alternate_data/inflation-charts
They have been doing no such thing. They have not put any effort into "calculating" anything. They simply take the official BLS and add a constant. They say so themselves:
> Responding to prior criticisms made by economist James Hamilton, John Williams explained in a private phone call that Shadowstats does not actually recalculate BLS data, rather, the Shadowstats CPI merely adds a constant to the officially reported numbers.[25]
* https://en.wikipedia.org/wiki/Shadowstats.com
The number at that site will always be higher than the BLS number because the people who run that site think it should be higher. They publish no methodology to recreate their number. Whereas if you want to look at what BLS is doing you can download code:
* https://en.wikipedia.org/wiki/MIT_Billion_Prices_project
Also, the official Shadowstats.com report costs $175 today (2021-05-11). However:
> Shadowstats doesn’t come cheap: currently, an annual subscription costs $175.
> Six years ago, an annual subscription cost … $175.
* https://krugman.blogs.nytimes.com/2012/08/25/another-alterna...
$175. Huh. Where's that inflation?
And velocity (V) has dropped off a cliff:
* https://fred.stlouisfed.org/series/M2V
* https://en.wikipedia.org/wiki/Money_supply#Link_with_inflati...
While amusing anecdata, your picture of a copper cable price is an indication of not much:
> Well, booming economies often run into temporary bottlenecks, which show up in surging prices for selected goods. For example, the price of copper tripled between December 2008 and February 2011, even though recovery from the 2008 recession was fairly sluggish.
* https://www.nytimes.com/2021/05/06/opinion/us-inflation-fede...
* https://archive.is/64iz2
For a history of copper prices see:
* https://fred.stlouisfed.org/series/PCOPPUSDM
If you look up the inflation rate 2008-2011 you'll find it was nothing to write home about.
https://news.ycombinator.com/newsguidelines.html
HN threads are conversations. Anecdotes are the life blood of conversation. This is just people being human, as they should be.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Inflation increases the value of assets relative to consumption. Inflation increases the gap between the wealthy and the poor.
Deflation reduces the value of assets and makes consumption more affordable. Deflation reduces the gap between the wealthy and the poor.
This is complete and utter non-sense and engaging some simple math skills shows why:
> But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year.
> If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years.
> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[fn2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.
> This is absurd and patently false but that’s the claim you’re making if you really think inflation is this high.
* https://awealthofcommonsense.com/2021/01/inflation-truthers/
[fn2] is a link to the Chapwood Index.
If inflation is >10% as Chapwood claims, but growth was only 2-3%, then that would mean there was >7% deflation in real terms. If we had really deflation that big the economy would be collapsing à la the Great Depression.
To repeat the key line:
> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year, that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.
http://www.shadowstats.com/alternate_data
A shift of both demand and supply, resulting in increased prices, is one way inflation can happen.
What is important in CPI inflation are the prices consumers pay.
How that fits into bigger picture money supply * money velocity is a different conversation
We don't see any big CPI increase caused by quantitative easing. Wealthy people don't increase their food quality/need. I assume there's some effect of stimulus checks since most of them went to the 90% poorest Americans. Without, we'd might even see deflation.
What I took from that article is that inflation, as so many things in economics, is however you define it.
I wonder what the outcome of the growing split between poor and rich will be.
/s
Anybody living in the world can tell you that consumer prices are up a lot, lot more than 2.6%. Look even at this very thread. Food prices are way up, lumber prices are way up, restaurant prices are way up, clothing costs are up. Lots of goods literally just seem unbuyable at this point. Even in my city (nowhere near the southeast) people are now lining up to buy gas, which is also at the highest price it has been in almost 8 years.
Bullshit CPI is up 2.6%. Don't give me that propaganda number.
God damnit stuff like that is so insulting. People, real actual human being are suffering right now. It's practically evil to put out obviously gaslighting bullshit statistics like this as if they're crazy to notice that literally everything in their life has gotten more expensive.
"When a measure becomes a target, it ceases to be a good measure."
Indeed.
who knew that if you cherrypick from a list of items rather than using a broad basket, you can get arbitrarily higher/lower averages?
Gas is up. That's naturally going to increase cost of nearly everything that depends on that mode of transportation. Certainly, that's directly or indirectly just about everything.
https://ycharts.com/indicators/boston_retail_price_of_gasoli....
Something is going on with California prices to push it to $4.20+ a gallon.
https://ycharts.com/indicators/san_francisco_retail_price_of...
https://www.latimes.com/business/la-fi-gasoline-manipulation...
Apparel, down -2.5%
Medical care commodities, down 2.4%
Motor vehicle insurance, down 2.5%
Airline fares, down 15.1%
But I do agree that we are in a period of very high inflation.
The most expensive part actualy is car rentals. Car rentals in Maui are insanely expensive, if you can even get a rental. One of my friends was quoted $900/day. In other islands like Big Island and Oahu, they are cheaper ($50-80/day) if you can find a deal.
Why do we care if those things are cheaper if no one needs them?
One thing they do to keep CPI low is using "equivalent items".
So if the iPhone 4 cost $500 ten years ago, and you can now buy an "equivalent" cheap Android from WalMart for $50 then they measure this as deflation.
[1] https://www.anandtech.com/show/2556
[2] https://en.wikipedia.org/wiki/Radeon_RX_6000_series
They will say your 13 year old HD 4750 costs next to nothing these days. They compare like specs now with those last year, so technological progress is counted as deflation.
Maybe it does? From a GFLOPS/s point of view it's outperformed by the integrated graphics in your CPU (eg. https://en.wikichip.org/wiki/intel/uhd_graphics/630), which essentially costs nothing.
As was predicted:
> So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers.
> The question will be whether these price increases are a 2010-2011-type blip or something more dangerous. Smart observers will look past the headlines to measures of underlying inflation — not just the Fed’s standard “core” measure but things like the Atlanta Fed’s sticky price index as well. Anecdotal evidence, otherwise known as “talking to people,” will also be important: Are businesses actually starting to set prices and wages based on the expectation of high future inflation?
> If they aren’t — and my bet is that they won’t be — then the lesson of 2010-2011 will remain: Don’t panic.
> Now as then there are people eager to denounce government attempts to help the economy. And it’s certainly possible that the American Rescue Plan will turn out, in retrospect, to have been too much of a good thing. But don’t let the usual suspects seize on a few months’ inflation data as evidence of looming disaster.
* https://www.nytimes.com/2021/03/22/opinion/us-inflation-stim...
* https://archive.is/Vxj5h
I don't how old you are, but we went through the same thing ten years ago:
> Well, booming economies often run into temporary bottlenecks, which show up in surging prices for selected goods. For example, the price of copper tripled between December 2008 and February 2011, even though recovery from the 2008 recession was fairly sluggish.
* https://www.nytimes.com/2021/05/06/opinion/us-inflation-fede...
* https://archive.is/64iz2
For a history of copper prices see:
* https://fred.stlouisfed.org/series/PCOPPUSDM
If you look up the inflation rate 2008-2011 you'll find it was nothing to write home about.
Will it actually be a problem this time around? It certainly can, and people are concerned about it. They're paying attention to it. But we had 3% inflation in the 1990s and the world didn't end.
Which specific parts of the numbers do you disagree with?
> clothing costs are up
In what world? Clothing costs are way down
> Food prices are way up
Some food prices are up, some are flat
> Lots of goods literally just seem unbuyable at this point
Like what?
> people are now lining up to buy gas
Not sure how this fits in with the rest of your rant
> lumber prices are way up
Yeah, not many households are spending a large chunk of their income on lumber
How is your anecdotal evidence more valuable than the GP’s?
I did some grocery shopping for my parents the other day. Three tomatoes, three green peppers, a half gallon of milk, one bunch of bananas, and a soup bread. "Give me a twenty(USD)," I said. "No way, prices are higher than that," said my dad. "Take two."
The bill came out to $13.60.
Isn't this due to the pipeline cyberattack though? Completely unrelated to the other points I believe.
They needed and need to invest heavily in education. Incentivize in-demand careers. Silly majors like gender studies, you pay your own way.
The damage being done in manufacturing right now dwarfs anything from last year.
Every government gets away with printing money for a very short time, then the Zimbabwe Effect takes over. It will happen in the US just like it happened in the Confederacy. IIRC, in 1865 one silver dollar cost sixty paper dollars in exchange.
In Germany in 1923, one wheelbarrow-load of Weimar Deutchmarks could buy you a loaf of bread.
Many talk about the financial problems like the acrobat spinning lots of plates on sticks. He's having problems keeping them going, and those plates are getting wobblier and wobblier.
If I have to make a prediction, I'd say in the next 5 years or so. So don't take on too much debt for you to handle, and start prepping for very difficult times.
The Confederate currency wasn't backed by any assets, so it lost value as their defeat became more likely. Apparently, it lost 20% of it's value after the battle of Gettysburg.
Zimbabwe's government seized the land of white farmers and gave them to people who lacked farming knowledge and experience. Predictably, their output cratered, sparking the hyperinflationary spiral.
Germany lost a huge amount of it's productive capabilities due to the Treaty of Versailles. Keynes wrote a fantastic book (The Economic Consequences of Peace) that lays the economic case for why the Treaty would be a disaster. Germany basically had much of its land, equipment, and other assets seized while also being saddled with significant war debts. They were effectively forced into hyperinflation by the structure of the treaty.
And the US production figures have gone where in the last 40 years? In 1980 the US was the world's biggest creditor nation. By 1988 the US was the world'd biggest debtor nation.
The debt and deficit have only grown larger since then.