>The CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors' and dentists' services, drugs,
and other goods and services that people buy for day-to-day living.
Convenient how it doesn't also include housing cost increases, as if that's not part of day-to-day living, like we're all snails carrying our house on our back we got for free since birth, when housing costs are possibly the highest burden on most young workers now.
> Convenient how it doesn't also include housing cost increases …
It does, but only urban renting. It doesn’t measure increases in housing costs for suburbs directly. In particular it does not track increases in home values or mortgage payments for new buyers based on current rates.
To be fair, this is a really common myth. Unless you actually read the BLS methodology, you wouldn't have known. And in most places, anyone attempting to combat this myth is met with down votes.
POTUS has been reported as saying that hes waiting for midterms to end before taking action. I see at least two more years with no rate cuts; the possibility of fuel rationing also appears to be possible in light of all the refining/logistics facilities being wantonly destroyed. Its going to be a very rough time.
And just what action is POTUS going to do to make things better? He's not in charge of interest rates. Start another useless war? Piss off another country? More inflationary tariffs? Give another multi-billion military contract to his family?
> The index for food was unchanged in September, as the index for
food away from home increased 0.2 percent and the index for food at home fell 0.1 percent.
Restaurant prices are absolutely out of control. My local Chickfila is no longer wrapping cars around the parking lot. They might still be putting up good numbers via expansion but there is no way the per-store economics are trending well.
I remember when it was arguably cheaper (especially once you factor in your time) to go buy off the Taco Bell value menu. You could get a bag of burritos filled to the top for like $12. This will hardly purchase a single menu item today.
It feels like we are in some kind of fast food death spiral right now.
I eat at Taco Bell way too much, in Manhattan, and this is hogwash. I'm looking at the menu on my phone right now.
A cheesy bean and rice burrito (404 calories) is $1.49.
Not only are there no single items anywhere close to $12, there are seven combos (that include a drink) for under $12, and the most expensive ones are $13-14 (excluding group combos).
My typical order costs $8.48 with tax and includes two crunchy tacos, a beefy 5-layer burrito, cinnamon twists, and a medium drink.
If salaries also took the elevator, then it's a recipe for hyperinflation.
Slow wage growth is a natural check on runaway inflation.
Yes, it's cruel on an individual level, but on a macro level, we are better off.
I know the macroeconomics argument, but it leaves the same distaste in my brain that "trickle down economics" leave.
All I see lately is that for example macro numbers adjusted by inflation seem to tell a story of increased purchase power, but reality seems a bit.. different? dunno.
Inflation comes from the monetary supply not government spending. If you want lower inflation, you increase interest rates to discourage loans and mortgages.
Not al all in this case. This is all caused by lower physical supply of oil, gas, diesel and fertilizer from the Iran War. Tightening the money supply will not fix this.
In that case, the word "inflation" is overloaded by describing two very different things.
Thing one, low interest rates result in higher availability of money, causing prices to go up due to increased monetary supply.
Thing two, scarcity of a resource (diesel) causes price of that resource to go up. The resource happens to run the backbone of our economy, so most other prices go up as a result.
These are not the same, as the first is the weakening of the currency against some theoretical static "value", and the second involves the currency keeping its same "value", and instead it is the goods themselves which require more of that value to be produced/sold.
The end result (prices up across the board) is the same but the mechanism is very different.
Tightening can "fix" this. Monetary supply isn't the cause of the inflation, so a monetary supply fix will cause nasty secondary effects, but tightening the monetary supply will lower inflation. It'll work by destroying parts of the economy, reducing demand. Oil prices might still go up, but prices of other things will go down because all the unemployed people are buying less stuff.
If you bomb your supply chains, no amount of interest rate manipulation will make it come down (supply shock through destruction of capacity)
If you make all doctors/lawyers to undergo recertification, medical costs will skyrocket (supply shock through regulation)
If you deport all your construction workers, bringing construction to a screeching halt, housing costs will skyrocket (supply shock through xenophobia)
If you bomb your capacity to produce oil and consumers must pay more for oil that money comes from elsewhere i.e less video games. That is simply a price increase not inflation. It would like confusing the weather and climate. Inflation is defined as the "general increase in prices".
If you add money to the existing finite amount of money you get inflation.
Yes and no. At the end of the day, there is a certain natural demand for goods/services and a natural production capacity.
Suppressing demand below natural production capacity is just chopping of your own arm. That's why Interest rates are the Big(O) factor it is made out to be. It is always government policies
-- allow economy to operate at full capacity
-- don't print (borrow) money more than full capacity
Who buys the hundreds of trillions in government bonds? The USA has a lot of buyers, they’re lucky as that’s not the case everywhere. Sometimes the spending is too out of control and there aren’t enough organic buyers. That’s when central banks come in and go brrrr and money supply increases.
I think people would bear it better if the stunted income growth was felt equally across society, but this has never been the case. There is no 'Blitz spirit' where even the wealthiest members of society must take a cut, instead our salaries decline, our costs go up, while the oligarchs do better and better. From a political economy point of view, that's not a good position to find yourself in indefinitely.
If people get punished by the economy with no end in sight, eventually an electoral majority will go 'sod macroeconomics, no amount of economic efficiency can justify us being insulted to our faces' and then politics will become completely unpredictable. I don't think macroeconomics can be used as a justification for maintaining very high socioeconomic inequality indefinitely, people naturally rankle at unfairness when they've for the most part done the right thing.
In my view measures to tackle inflation must be coupled with measures to tackle inequality, at least in its most blatantly visible forms, or the inevitable result given enough time is populist politics and instability. A huge factor in Brexit for example was 40 years' worth of callous political economy chickens finally coming home to roost in Westminster.
Heating oil prices increasing 26% in August and September, up 74% YoY... it's going to be a horrible winter for a lot of families, mine included. Heating bills are going to be over $1k / month for a lot of the northeast. You can't budget for a 75% increase in a major expense.
Here in Ireland it seems like I'll be spending north of 1k in oil heating thanks to certain armed conflicts... and I still have 200 liters from the previous owner. 840 EUR for 500 liters, who knows if that will be enough for this winter.
they call it "market basket" inflation. If eggs go up 20% and steak goes up 3%, inflation is recorded as 3% because obviously people will choose steak over eggs this year. Then next year, if steak goes up by 20% and eggs go up by 3%, inflation is recorded as 3% because obviously people will choose eggs over steak this year. This way, inflation is recorded as 6% even though everything costs 25% more; the governace gets to pat themselves on the back in the Bahamas with their piles of cash while the proles are left dumbfounded and starving.
That's not how it works. Both steak and eggs are part of the basket every month. Specifically, eggs are 0.133% of the answer and ground beef/roasts/steaks are 0.638% of the answer.
> Prices are collected each month in 75 urban areas across the country from about 6,000 housing units and approximately 22,000 retail establishments (department stores, supermarkets, hospitals, and other types of stores and service establishments). [...] Prices of most goods and services are obtained by personal visit, telephone call, web, or app collection by the Bureau's trained representatives.
The BLS does document their process in detail on their FAQ [0].
This might not match your experience because your family doesn't shop the same basket of goods the families the BLS surveyed do. There are also regional variations in the prices of goods. Even store prices in the same region vary. All of these variations get averaged out.
> Where are they shopping that prices have only risen 3.7% YoY? That does not match neither my grocery bill inflation nor product shrinkflation.
All-items was 3.7%. That does not mean components with-in the overall rate were also 3.7%. Particular components may have gone up more that the overall rate, but only a fraction of that is part of the all-items that is seen in the headlines.
Further, if your personal basket of goods is most likely different than the average basket of goods mix, so your personal inflation rate will be different from the headline number. StatCan, who does the CPI for Canada, actually has a tool for finding out your personal inflation rate based on your purchases:
If you're prepared for a bit of a rabbit hole you can look at https://www.shadowstats.com/ which was allegedly the result of airline econometrics predictive model stopping working and that spurred someone to figure out what was going on.
The idea that the government would cook the books in their favor isn't outside the realm of possibility. The idea that it's been happening for 40+ years is worrying.
> The idea that the government would cook the books in their favor isn't outside the realm of possibility.
Every admin, both major parties and all of big business gain from understating inflation, it's a fundamental conflict of interest. Calling it a "possibility" might be a tiny tad timid, I think.
The worst part of all this is that they are now going to raise rates when this is not money supply driven inflation. You cannot lower inflation by interest rates when it is caused by rising oil and ferilizer prices.
But I am afraid this is what they will do to screw the democrats after they take the house and the senate and then blame the market crash all on them.
45 comments
[ 0.84 ms ] story [ 13.2 ms ] threadAnd CPI is "Consumer Price Index", aka inflation measurement.
For anyone unfamiliar with the title. (Like me)
Convenient how it doesn't also include housing cost increases, as if that's not part of day-to-day living, like we're all snails carrying our house on our back we got for free since birth, when housing costs are possibly the highest burden on most young workers now.
Edit: I am wrong
It does, but only urban renting. It doesn’t measure increases in housing costs for suburbs directly. In particular it does not track increases in home values or mortgage payments for new buyers based on current rates.
To be fair, this is a really common myth. Unless you actually read the BLS methodology, you wouldn't have known. And in most places, anyone attempting to combat this myth is met with down votes.
Restaurant prices are absolutely out of control. My local Chickfila is no longer wrapping cars around the parking lot. They might still be putting up good numbers via expansion but there is no way the per-store economics are trending well.
I remember when it was arguably cheaper (especially once you factor in your time) to go buy off the Taco Bell value menu. You could get a bag of burritos filled to the top for like $12. This will hardly purchase a single menu item today.
It feels like we are in some kind of fast food death spiral right now.
A cheesy bean and rice burrito (404 calories) is $1.49.
Not only are there no single items anywhere close to $12, there are seven combos (that include a drink) for under $12, and the most expensive ones are $13-14 (excluding group combos).
My typical order costs $8.48 with tax and includes two crunchy tacos, a beefy 5-layer burrito, cinnamon twists, and a medium drink.
All I see lately is that for example macro numbers adjusted by inflation seem to tell a story of increased purchase power, but reality seems a bit.. different? dunno.
Generally, it's fine if it's the little guy who pays the price. So true in so many areas.
Not al all in this case. This is all caused by lower physical supply of oil, gas, diesel and fertilizer from the Iran War. Tightening the money supply will not fix this.
Thing one, low interest rates result in higher availability of money, causing prices to go up due to increased monetary supply.
Thing two, scarcity of a resource (diesel) causes price of that resource to go up. The resource happens to run the backbone of our economy, so most other prices go up as a result.
These are not the same, as the first is the weakening of the currency against some theoretical static "value", and the second involves the currency keeping its same "value", and instead it is the goods themselves which require more of that value to be produced/sold.
The end result (prices up across the board) is the same but the mechanism is very different.
If you bomb your supply chains, no amount of interest rate manipulation will make it come down (supply shock through destruction of capacity)
If you make all doctors/lawyers to undergo recertification, medical costs will skyrocket (supply shock through regulation)
If you deport all your construction workers, bringing construction to a screeching halt, housing costs will skyrocket (supply shock through xenophobia)
If you bomb your capacity to produce oil and consumers must pay more for oil that money comes from elsewhere i.e less video games. That is simply a price increase not inflation. It would like confusing the weather and climate. Inflation is defined as the "general increase in prices".
If you add money to the existing finite amount of money you get inflation.
Suppressing demand below natural production capacity is just chopping of your own arm. That's why Interest rates are the Big(O) factor it is made out to be. It is always government policies
-- allow economy to operate at full capacity
-- don't print (borrow) money more than full capacity
If people get punished by the economy with no end in sight, eventually an electoral majority will go 'sod macroeconomics, no amount of economic efficiency can justify us being insulted to our faces' and then politics will become completely unpredictable. I don't think macroeconomics can be used as a justification for maintaining very high socioeconomic inequality indefinitely, people naturally rankle at unfairness when they've for the most part done the right thing.
In my view measures to tackle inflation must be coupled with measures to tackle inequality, at least in its most blatantly visible forms, or the inevitable result given enough time is populist politics and instability. A huge factor in Brexit for example was 40 years' worth of callous political economy chickens finally coming home to roost in Westminster.
There's lots of data out there, for example: https://prices.marketreportblog.com
The BLS does document their process in detail on their FAQ [0].
This might not match your experience because your family doesn't shop the same basket of goods the families the BLS surveyed do. There are also regional variations in the prices of goods. Even store prices in the same region vary. All of these variations get averaged out.
This is why you can't extrapolate from n=1.
[0] https://www.bls.gov/cpi/questions-and-answers.htm
All-items was 3.7%. That does not mean components with-in the overall rate were also 3.7%. Particular components may have gone up more that the overall rate, but only a fraction of that is part of the all-items that is seen in the headlines.
Further, if your personal basket of goods is most likely different than the average basket of goods mix, so your personal inflation rate will be different from the headline number. StatCan, who does the CPI for Canada, actually has a tool for finding out your personal inflation rate based on your purchases:
* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...
The idea that the government would cook the books in their favor isn't outside the realm of possibility. The idea that it's been happening for 40+ years is worrying.
Every admin, both major parties and all of big business gain from understating inflation, it's a fundamental conflict of interest. Calling it a "possibility" might be a tiny tad timid, I think.
But I am afraid this is what they will do to screw the democrats after they take the house and the senate and then blame the market crash all on them.