Real Life Inflation vs Government Inflation

[gevorg]

Their method of calculation is 100% transparent.

LOL, just because a method is "transparent", doesn't make it a valid representation of inflation. Recreating CPI with the government's method doesn't tell much. Well, except for the delusional ones.

 

[fskimospy]

LOL, just because a method is "transparent", doesn't make it a valid representation of inflation. Recreating CPI with the government's method doesn't tell much. Well, except for the delusional ones.

And how will you explain away the fact that CPI tracks quite well over time with independent estimates like the Billion Prices Project? Is MIT in on the conspiracy as well?

Additionally, what statistical methods are you using to calculate consumer price inflation that lead you to different results and why are they more valid?

 

[gevorg]

And how will you explain away the fact that CPI tracks quite well over time with independent estimates like the Billion Prices Project? Is MIT in on the conspiracy as well?

Additionally, what statistical methods are you using to calculate consumer price inflation that lead you to different results and why are they more valid?

see here

The CPI is no longer a tool to accurately measure inflation, but an instrument of propaganda the government uses to hide accelerating inflation from the public and financial markets. Modest CPI increases over the past several years do not reflect an absence of inflation, but a design flaw in the index that fails to fully capture the magnitude of price increases. Central bankers drawing economic conclusions regarding inflation and monetary policy based on this highly flawed data point are making a major policy error.

Note: Prices for the twenty items in our basket rose 44.3% during a ten-year period despite an official rise in the CPI of just 27.5% during the same time frame. But that is using official government numbers to evidence those price increases. However, judging by the inaccuracy of government numbers on other items, such as newspapers and health insurance, the actual rate of increase of the prices of the goods in our basket was likely much higher than what the government claimed!

 

[ivwshane]

see here

Your rebuttal is a YouTube video from a guy trying to sell books and other crap? Propaganda indeed!

 

[fskimospy]

see here

LOL. A youtube video by Peter Schiff? That measures 20 goods? (not to mention his basket of goods is mostly food and gas price related items, which is a basic economic analysis no-no.)

You have to be joking.

By the way, I strongly suggest you go examine Mr. Schiff's predictions on the price of gold, US bond prices, and inflation over the last five years. How's gold at $5,000 coming? (oops, it's plunging) How's hyperinflation and a currency crisis by 2012 coming? (guess we missed it) Why is it that despite all their dire predictions that even by their own numbers we've had higher inflation in the past? (shhh, don't tell anyone)

I've offered you a comprehensive, independent comparison point from MIT that tracks quite well with CPI. You offered a youtube video. I'm sorry, that's not how it works.

 

[Captain Picard]

The metric for inflation, as presented by the government, is a worthless metric for the average person in the U.S.. It doesn't really matter if it's an "accurate" number, it doesn't matter if MIT, Google, or anyone else corroborates the official numbers. For the average person, the price of necessities, not discretionary goods, is all that matters.

Health insurance costs going through the roof? It doesn't matter what the official rate of inflation is, that price increase hurts working and middle-class citizens more than the published rate will show. Same with the price of food, energy, water, and rent. Using the official rate of inflation as a measurement of well being for the average person is disingenuous, at best.

The vibe I get from proponents of the government published rate of inflation is that as long as the rate looks good, there's nothing to complain about, and anyone who takes issue with it is just an uneducated conspiracy theorist.

Fact is, the official metric is just about worthless for representing the economic health of the majority of the population.

 

[fskimospy]

The metric for inflation, as presented by the government, is a worthless metric for the average person in the U.S.. It doesn't really matter if it's an "accurate" number, it doesn't matter if MIT, Google, or anyone else corroborates the official numbers. For the average person, the price of necessities, not discretionary goods, is all that matters.

I'm sorry but it absolutely matters. For the average person the price of everything they buy is what matters when calculating inflation, not simply the necessities.

Health insurance costs going through the roof? It doesn't matter what the official rate of inflation is, that price increase hurts working and middle-class citizens more than the published rate will show. Same with the price of food, energy, water, and rent. Using the official rate of inflation as a measurement of well being for the average person is disingenuous, at best.

This makes no sense. Those measures are included in headline CPI, which is publicly available.

The vibe I get from proponents of the government published rate of inflation is that as long as the rate looks good, there's nothing to complain about, and anyone who takes issue with it is just an uneducated conspiracy theorist.

Fact is, the official metric is just about worthless for representing the economic health of the majority of the population.

You can't just declare something and have it be true. Show us a statistical analysis that measures that. Show us an alternative inflation measure that provides a better outcome. Something.

Let's be honest here. An awful lot of people don't like the CPI numbers because those numbers indicate the fact that their economic philosophy is wrong. That's why you see Peter Schiff furiously attempting to discredit CPI, the BPP, etc. It shows he doesn't know what he's talking about. Instead of changing his views, he is desperately searching for a way out. Cue government conspiracy.

 

[Captain Picard]

Do I purchase one unit of every good and service that's tallied into the published rate? If I did, the published number might mean something to me. Since I don't, only the prices of what I buy matter to me. For someone who doesn't or can't buy much beyond necessities, an official number in the range of 2 or 3 percent doesn't accurately reflect the change in their cost of living.

 

[sm625]

I simply do not understand this continuing attempt by some to convince themselves that the CPI is a terrible conspiracy. The conservative economic model predicted huge inflation. It was wrong. Instead of wasting all this time and energy trying to show it was really right all along and there is some evil conspiracy, why not spend that time learning more about economics so that next time you'll be right? (not you, Genx)

Tuition costs skyrocketing is not a conspiracy. That's reality brought on by government interference in that market. Just like it did for housing 10-15 years ago. The govt inserted itself into housing. It pried and forced its way in and the result was a huge bubble. Same goes for health care. Govt enforced monopolization has eliminated competition which has allowed prices to soar. You literally cant open a clinic to do heart surgeries for $3000 in this country. You can elsewhere. But not here. So the costs are purely artificially inflated. You cant pay $36 for a shot of antivenom here, but you can pay that price in some other country, even if it was manufactured here. That is blatant criminal cartel activity. If you were to do these things in the private sector, you would be prosecuted and imprisoned. That is not a conspiracy. None of the govt malfeasance is counted amongst the basket of goods used to calculate CPI. That's jsut a fact. You can go down the list

None of this makes mint.com more accurate than the CPI. But we do know for a fact that the CPI is blatantly inaccurate.

To get the most accurate number you have to take all the spending of the median household, then adjust that by some sort of energy proxy deflator. Take total electricity consumption per capita as an example. Since total electricity consumption per capita has been flatlined, this is actually deflationary. So there are strong deflationary forces at work on the economy, against a backdrop of rampant money and credit creation for the extreme wealthy. All known reputable measures of inflation do not separate these two disparate forces. That's a big part of why the middle class continues to get screwed. The real paradigm continues to be obfuscated.

When they calculate the CPI what they are doing is wholly or partially eliminating lines like that red line in the chart above, using any manner of gaming they can think of. They can literally do whatever they want. There is nothing moral or rational about their methodology. Say when you go to college you might buy a dozen books. Some rapidly rise in price every year, others are the same price every year. They can easily choose only the books that do not rise in price and completely ignore the books that are rising in price. That's what they do. Same goes for fees that are counted amongst the cPI. Some fees rise every year. Others you know stay the same for years. They choose which ones they put in the CPI. There is not 3rd party of people's advocate that makes these decisions. The decisions are purely in the interest of those in the administration. Like with public unions there is no adversarial process to check and balance any of what goes on in the BLS.

 

[fskimospy]

Tuition costs skyrocketing is not a conspiracy. That's reality brought on by government interference in that market. Just like it did for housing 10-15 years ago. The govt inserted itself into housing. It pried and forced its way in and the result was a huge bubble. Same goes for health care. Govt enforced monopolization has eliminated competition which has allowed prices to soar. You literally cant open a clinic to do heart surgeries for $3000 in this country. You can elsewhere. But not here. So the costs are purely artificially inflated. You cant pay $36 for a shot of antivenom here, but you can pay that price in some other country, even if it was manufactured here. That is blatant criminal cartel activity. If you were to do these things in the private sector, you would be prosecuted and imprisoned. That is not a conspiracy. None of the govt malfeasance is counted amongst the basket of goods used to calculate CPI. That's jsut a fact. You can go down the list.

None of this makes mint.com more accurate than the CPI. But we do know for a fact that the CPI is blatantly inaccurate.

To get the most accurate number you have to take all the spending of the median household, then adjust that by some sort of energy proxy deflator. Take total electricity consumption per capita as an example. Since total electricity consumption per capita has been flatlined, this is actually deflationary. So there are strong deflationary forces at work on the economy, against a backdrop of rampant money and credit creation for the extreme wealthy. All known reputable measures of inflation do not separate these two disparate forces. That's a big part of why the middle class continues to get screwed. The real paradigm continues to be obfuscated.

When they calculate the CPI what they are doing is wholly or partially eliminating lines like that red line in the chart above, using any manner of gaming they can think of. They can literally do whatever they want. There is nothing moral or rational about their methodology. Say when you go to college you might buy a dozen books. Some rapidly rise in price every year, others are the same price every year. They can easily choose only the books that do not rise in price and completely ignore the books that are rising in price. That's what they do. Same goes for fees that are counted amongst the cPI. Some fees rise every year. Others you know stay the same for years. They choose which ones they put in the CPI. There is not 3rd party of people's advocate that makes these decisions. The decisions are purely in the interest of those in the administration. Like with public unions there is no adversarial process to check and balance any of what goes on in the BLS.

Lots of falsehoods and inaccuracies in here. The government had been involved in the mortgage market long before the housing crisis and there's little reason to believe they were the cause.

College tuition is explicitly included in CPI.

Health care is explicitly included in CPI.

The basket of goods comes from a 7,000 family survey.

There are alternative measures of inflation that generally agree with CPI.

Need I go on?

 

[fskimospy]

Do I purchase one unit of every good and service that's tallied into the published rate? If I did, the published number might mean something to me. Since I don't, only the prices of what I buy matter to me. For someone who doesn't or can't buy much beyond necessities, an official number in the range of 2 or 3 percent doesn't accurately reflect the change in their cost of living.

Is the CPI the Captain Picard CPI or is it the United States CPI?

The weighting and inclusion of goods is based on the experience of more than 7,000 families.

 

[Captain Picard]

Is the CPI the Captain Picard CPI or is it the United States CPI?

The weighting and inclusion of goods is based on the experience of more than 7,000 families.

Now we're getting somewhere. The U.S. CPI doesn't represent me, or the experience of anyone who falls outside the experience of those 7000 families, their combined averages, and the basket of goods and services tallied into the number.

 

[fskimospy]

Now we're getting somewhere. The U.S. CPI doesn't represent me, or that of anyone who falls outside the experience of those 7000 families, their combined averages, and the basket of goods and services tallied into the number.

Are you saying those 7,000 families do not present a statistically valid random sample? If so, on what basis?

 

[Captain Picard]

Are you saying those 7,000 families do not present a statistically valid random sample? If so, on what basis?

I'm not passing judgment on the validity of the methods used in calculation. I'm passing judgment on the RESULT of those calculations. The fact is, it's a poor metric for anyone who isn't represented by the inputs into the calculation, or the resulting numbers. I dare say that's quite a few people. Depending on what portion of their finances are taken by certain goods or services, their experience will be far different from the average.

 

[fskimospy]

I'm not passing judgment on the validity of the methods used in calculation. I'm passing judgment on the RESULT of those calculations. The fact is, it's a poor metric for anyone who isn't represented by the inputs into the calculation, or the resulting numbers. I dare say that's quite a few people. Depending on what portion of their finances are taken by certain goods or services, their experience will be far different from the average.

Right, but the only way their experience would be likely to be far different from the average would be if they were not a statistically valid random sample. Law of large numbers, central limit theorem, etc.

 

[Anarchist420]

There will eventually be hyperinflation when the interest on the public debt gets too high, or if there is a huge private debt deflaion and the public demands that Congress start printing money directly.

 

[Captain Picard]

Right, but the only way their experience would be likely to be far different from the average would be if they were not a statistically valid random sample. Law of large numbers, central limit theorem, etc.

True, but these outliers are people, and how many do they number? Hundreds of thousands? Millions? Tens of millions? I admit, that was a factually unfounded statement when I declared that it was a worthless metric for "the majority" of people. It was emotionally charged, born out of contempt at how many people fall through the cracks in this measure of economic health. Sure, many people only vary by a few tenths of a percentage point, some by a few percentage points, and some are just out in left field compared to that number.

Furthermore, for anyone with an inherent skepticism of large federal governments, it's easy to assume that there may be incentives for the bureaus that calculate this number to favorably misrepresent this number. Depending on who one thinks may (or may not) have vested interests in national and international finance and economics, it's not a stretch of the imagination to be skeptical of the methods of calculation. Are they statistically valid? I'm sure they are. Is it possible to maintain statistical validity, but produce a result that is more favorable than all the raw data may suggest? I'm sure it is. Can any of us declare with absolute certainty that things are as plain as they seem? I personally don't think so.

 

[Kwatt]

Are you saying those 7,000 families do not present a statistically valid random sample? If so, on what basis?

If anyone with survey/sampling experience would answer a question for me.

7,000 families with 4 members each = 28,000 people.
28,000 / 350,000,000 = 0.00008 is that considered a large enough sample to be accurate?

Thanks

.

 

[fskimospy]

If anyone with survey/sampling experience would answer a question for me.

7,000 families with 4 members each = 28,000 people.
28,000 / 350,000,000 = 0.00008 is that considered a large enough sample to be accurate?

Thanks

.

What you need to determine the sample size depends on the means you are comparing, the confidence interval, and the standard deviation of whatever good in the basket you're trying to measure, etc.

So, the answer is... it depends.

If it helps any however, in order to hit a 95% confidence interval for all 350,000,000 million Americans on a polling question you need to interview about 1,000 people, or .000028%.

 

[fskimospy]

True, but these outliers are people, and how many do they number? Hundreds of thousands? Millions? Tens of millions? I admit, that was a factually unfounded statement when I declared that it was a worthless metric for "the majority" of people. It was emotionally charged, born out of contempt at how many people fall through the cracks in this measure of economic health. Sure, many people only vary by a few tenths of a percentage point, some by a few percentage points, and some are just out in left field compared to that number.

There are actually quite a few measures of inflation that BLS calculates specifically in an attempt to account for outlier populations with different needs like the elderly (CPI-E), people who live in big cities (CPI-U), etc. You might be right that standard CPI doesn't fit your life very well. If you're looking for people who have their income dominated by the 'necessities', perhaps headline inflation would be a better marker as that includes food and fuel inflation.

Furthermore, for anyone with an inherent skepticism of large federal governments, it's easy to assume that there may be incentives for the bureaus that calculate this number to favorably misrepresent this number. Depending on who one thinks may (or may not) have vested interests in national and international finance and economics, it's not a stretch of the imagination to be skeptical of the methods of calculation. Are they statistically valid? I'm sure they are. Is it possible to maintain statistical validity, but produce a result that is more favorable than all the raw data may suggest? I'm sure it is. Can any of us declare with absolute certainty that things are as plain as they seem? I personally don't think so.

I have less skepticism of bureaucracy than most, but this measure is largely corroborated by independent estimates. If they were seriously cooking the books, I think these other measures would show it.

 

[LegendKiller]

its a well known fact that "official" CPI is a joke

By whose "facts" is it a joke?

I would love to see your alternative measurement of inflation.

Shadowstats *is* a joke and is unfounded in reality.

And as far as riding a bus for .35 in 2003, whatever, that is a bunch of bullshit. I would *love* to see proof that.

There is not a single measurement of inflation out there from a proven, repeatable and fully transparent source that materially differs from the BLS statistics.

Furthermore, Schiff is a fucking loon, everybody knows this.


And to the joker who says that tuition is out of control because of the government being in SLs. Explain to me how the government has *ALWAYS* funded almost all of the student loan market for decades and tuition didn't raise nearly as much as it has now.

Further, explain how they have been funding the mortgage market for DECADES and it had never gotten out of control. People who blame the GSEs for the housing crisis don't have a fucking clue what caused the housing crisis.

 

[LegendKiller]

Now we're getting somewhere. The U.S. CPI doesn't represent me, or the experience of anyone who falls outside the experience of those 7000 families, their combined averages, and the basket of goods and services tallied into the number.

Do you eat college books and drink gas?

What is your measurement of inflation, please provide a fully auditable and repeatable sample of your goods for the last 10 years so we know you aren't full of shit (like most people who claim that their costs have gone up so much).

I know my costs haven't doubled in the last 10 years.

 

[mikegg]

Interesting article:

As you can see, the chart shows an uninterrupted line upwards. In 2000, the M2 Money Supply was around $4.5 trillion. Now it hovers close to $11.0 trillion.
Wait, there’s more! The Federal Reserve continues to create $85.0 billion a month in new money, pushing the money supply even higher. And “tapering” quantitative easing doesn’t mean the Federal Reserve will stop printing fiat currency; it just means they will slow the pace of printing.

http://smallbusiness.yahoo.com/advisor/cure-toll-inflation-retirement-accounts-172528602.html