Examining Inflation

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Riggerjack
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Joined: Thu Jul 14, 2011 3:09 am

Re: Examining Inflation

Post by Riggerjack »

@ campitor

Kinda hard for me to tell the forest from the trees in your objection.

In my view, if people are not interested in the complexities of currency flows, they just aren't interested. No amount of dancing, yelling and waving my arms in the air trying to explain the problem is going to get their attention (though my movements may cause an interesting side conversation about the interpretive dance skills of the autistic 😄).

As near as I can tell, you are objecting to CPI, and politics, and maybe something else.

People are going to do what they are going to do. They don't have to be manipulated into not caring about subjects that don't interest them. Public schooling trained them for that from early childhood! :twisted:

Now if you are objecting that political factions are up to some kind of CPI based shenanigans, and lack of an interested, educated public allows these shenanigans to continue, well, that's the beauty of a democracy.

If that is your concern, I would love to hear what you think should be done about it. If I have just misinterpreted you, please try again.

Campitor
Posts: 1152
Joined: Thu Aug 20, 2015 11:49 am

Re: Examining Inflation

Post by Campitor »

@Riggerjack

What's good about CPI:

CPI is a good for a limited measurement of the aggregate inflation across a set of goods and services for urban environments.

What's CPI not good for:

As a bellwether for individual fiscal planning. The "average" consumer basket of good and services may or may not be the individual's basket of goods and services in the present or in the future. The CPI is used to calculate a plethora of financial decisions at the Federal level. This creates incentives to report low CPI numbers, ergo your perceived purchasing power is different from your actual purchasing power.

Per the Bureau of Labor Statistics: https://www.bls.gov/respondents/cex/cea ... assistance.
The CPI affects nearly all Americans by:
  • Informing Federal decision-makers. The CPI provides monthly information about price changes which is used by the government, business and many others to make economic decisions. The President, Congress, and the Federal Reserve Board use trends in the CPI to help them make policy decisions. The CPI is often used to evaluate the effectiveness of government economic policy.
  • Adjusting dollar values. The CPI is used to automatically provide cost-of-living income adjustments to millions of American workers and retirees, and to adjust income eligibility levels for government programs and government assistance.
  • The CPI affects almost all Americans.
    • 53.0 million Social Security beneficiaries.
    • About 25.7 million food stamp recipients.
    • About 4.5 million military and Federal Civil Service retirees and survivors.
    • Over 29 million children who receive subsidies for school lunches.
    • Almost 2 million workers under collective bargaining agreements.
    • Federal income tax brackets are adjusted each year by the CPI affecting all taxpayers.
The above list shows that a lot of cash benefits are tied to those CPI numbers. A greater budget deficit would result as benefit payments increased as a result of higher CPI numbers. It would be politically unpopular to not adjust benefit payments upward to match the correctly adjusted CPI or how political decisions of an administration negatively impacted CPI rates.

I think investopedia does a good job of summarizing the critiques about CPI and how it's calculated: https://www.investopedia.com/articles/0 ... eindex.asp

My opinions regarding CPI didn't come about by reading investopedia. My opinions about CPI were formulated by reading various financial articles and economic papers over the years.

Investopedia's summary is below and the key takeaways I have put in bold font:
Investors could use the official CPI numbers, accepting the government reported figures at face value. Alternatively, investors are faced with choosing either Williams' or Ranson's measure of inflation, implicitly accepting the argument that the officially reported figures are unreliable. Therefore, it is up to investors to become informed on the topic and take their own stance on the issue.

Different CPI levels for a single price increase, depending upon consumer behavior, can be calculated using the BLS methodology, and it is not implausible that, depending upon consumption patterns, different rates of inflation may be experienced by a consumer. Therefore, the answer may be investor-specific.
There are no political solutions to the issue. I have never proposed that we should seek a political solution either. There are never any solutions, only tradeoffs. What I am trying to say is that any financial decisions or any perceived stability of the current economic system based off the CPI rate may be very wrong. In other words, when looking at CPI - Caveat emptor.

Mister Imperceptible
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Re: Examining Inflation

Post by Mister Imperceptible »

Federal Reserve Bank of St Louis
M2 Money Stock

This series will no longer be updated.

https://fred.stlouisfed.org/series/M2

User avatar
Alphaville
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Location: Quarantined

Re: Examining Inflation

Post by Alphaville »

Mister Imperceptible wrote:
Tue Mar 02, 2021 6:24 pm
This series will no longer be updated.
More information is available in the notes below the graph. This series is the suggested substitute: M2SL https://fred.stlouisfed.org/series/M2SL

[...]

This weekly series is discontinued and will no longer be updated. The non-seasonally adjusted version of this weekly series is WM2NS, and the seasonally adjusted monthly series is M2SL

Starting on February 23, 2021, the H.6 statistical release is now published at a monthly frequency and contains only monthly average data needed to construct the monetary aggregates. Weekly average, non-seasonally adjusted data will continue to be made available, while weekly average, seasonally adjusted data will no longer be provided. For further information about the changes to the H.6 Statistical Release, see the announcements provided by the source.


from the announcement:

As announced on December 17, 2020, the Board's Statistical Release H.6, "Money Stock Measures," will recognize savings deposits as a type of transaction account, starting with the publication today. This recognition reflects the Board's action on April 24, 2020, to remove the regulatory distinction between transaction accounts and savings deposits by deleting the six-per-month transfer limit on savings deposits in Regulation D.

etc.
Last edited by Alphaville on Tue Mar 02, 2021 7:08 pm, edited 1 time in total.

Riggerjack
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Re: Examining Inflation

Post by Riggerjack »

There are no political solutions to the issue. I have never proposed that we should seek a political solution either. There are never any solutions, only tradeoffs.
Technical caveat: so long as we are near the efficient frontier, there are only tradeoffs.

I would argue that we are at or near the efficient frontier of political science. Here, there are only tradeoffs.

If one is looking for a solution, then, one must look at other options. Finding a new curve, goes with finding a new solution, bypassing political inefficiencies.

But I have no idea how currency and politics can be separated in 2021.
.....

In all honesty, it seems we have looked at the same patterns, and reached different conclusions.

I am only really interested in solutions. Political tradeoffs are a fun distraction for people who have given up on solutions, and want to fight over scraps.

There's good money in this, it's an essential human strategy. But that's all it is. Reboot the cultural BIOS, look to see who can't defend their resources, and pounce.

Screw that. I grew up in that game at small scale. I have no interest in scaling it up.

So when I saw the flaws in CPI, I looked into them. And concluded that it was good enough for the purpose it was made for (economic measurements).

Yeah, it is misused. Yeah, those misuses have real consequences. But one can't modify CPI to make it the right tool for political systems. This thread went pretty far into why. And political systems need some metric to use, and I don't know of a better one.

As for investors,
Therefore, it is up to investors to become informed on the topic and take their own stance on the issue.
Seems like a simple rule to apply to all investment.
.......
If there is an incentive to under report, there is usually a counter incentive to over report. That's what a political system does. It creates noise and distortion and cover.

If that's not appealing, then some other system would be appropriate. Though again, I have no ideas on this front.

.....


This may just sound like "politics, bah humbug!". It may be only that, after all, I had no solutions to propose.

But I mean it as more than that. I mean it as:

Political problems are by their nature, nearly intractable. Determining who, what, when, and why, is only available at the children's story level. Looking in depth always shows the game behind the game. Looking harder, shows the game behind that. I don't know how deep the series goes, and players are all playing at multiple levels at the same time.

If one thinks they can map that in a useful way, best of luck. I can't. I can't even tell information from misinformation in this arena.

So I let it go. I have no control, and minimal influence. So I give politics the amount of thought that minimal influence is worth.

I recommend the same approach to CPI. :)

Mister Imperceptible
Posts: 1470
Joined: Fri Nov 10, 2017 4:18 pm

Re: Examining Inflation

Post by Mister Imperceptible »

Mister Imperceptible wrote:
Tue Mar 02, 2021 6:24 pm
Federal Reserve Bank of St Louis
M2 Money Stock

This series will no longer be updated.

https://fred.stlouisfed.org/series/M2
By the way, M3 stopped being reported in 2006:
https://fred.stlouisfed.org/series/M3

Where do we put the over/under for the reporting of the M1 series to be altered? 2029?

Never mind, looks like they just discontinued/altered M1 also:

https://fred.stlouisfed.org/series/M1

giskard
Posts: 226
Joined: Sat Apr 30, 2016 12:07 pm

Re: Examining Inflation

Post by giskard »

Mister Imperceptible wrote:
Tue Mar 02, 2021 7:16 pm
By the way, M3 stopped being reported in 2006:
https://fred.stlouisfed.org/series/M3

Where do we put the over/under for the reporting of the M1 series to be altered? 2029?

Never mind, looks like they just discontinued/altered M1 also:

https://fred.stlouisfed.org/series/M1
Everything is fine, just change the graph to be log-scale :lol:

JCD
Posts: 73
Joined: Sat Jul 20, 2019 9:12 am

Re: Examining Inflation

Post by JCD »

I'm not sure if this really belongs in a topic thinking about inflation of the past, but given many of the folks who think inflation of the future will not look like that of the past, it seems like it is one of the general threats to ERE.  This does not mean ERE resilience is broken, just the "Early Retirement" element could be under threat depending on future outcome and how bets are organized.   I didn't cite everyone I have read or listened to, just a sample set to capture some of the broad ideas.

Inflation Camp:

This camp goes from those who think we are going to have mild inflation of 2-3% to a crack up boom to hyperinflation.  Their reasoning tends to be around things like M1/M2 measures that @Mister Imperceptible cites.  How far out these predictions seems to vary, but in general I'd say most folks are not going much past the next year.  Maybe Michael Burry's hyperinflation comments go a few years out, but that is not the typical analysis I see.  My favorite of the stories in this camp is the idea that by moving manufacturing back to the US will cause costs to go up and thus inflation via resilience.

- Lyn Alden: https://youtu.be/OEBBpB_XtDU?t=65
- Jeremy Siegel: https://youtu.be/R2-lCKtky_0
- Russell Napier: https://youtu.be/p044vfmVvoA
- Louis-Vincent Gave: https://youtu.be/RSE6ui_eCNQ?t=985

"Bullishness" Those who seem to think things are more likely to end well for stock markets than not; be it only measured nominally or true recovery:
These folks seem to believe that the recession is over and we are about to enter into another bull run.  Josh Brown does note mini-bubbles but doesn't believe it could harm the market as a whole. These folks don't seem to get the sense anything is really wrong.

- Jim Cramer: https://www.youtube.com/watch?v=75seowYsc84
- Josh Brown: https://www.youtube.com/watch?v=SPCUKQ0lxbU

Deflation Camp:

The deflation camp is the most complex of the camps.  These folks vary in their thinking greatly into why deflation.  One group believes the system of bonds, treasuries and central banks will be forcing interest rates lower (against the will of the market). This group's view is all about the financial plumbing of the system, but the best simplification is the "just like Japan" analogy.  Another group believes that the 10% unemployed, housing forbearance, rent forbearance, etc will cause asset prices to drop whenever the government backs away from pumping the market up.  Yet others point at debt destruction (e.g. Visa/Mastercard seeing debt disappear) as destroying money and thus stimmies are just a shift in balance sheet between gov't and private individuals.  Since Visa charges greater interest compared to gov't debt, demand for dollars will drop.  While less deflationary, one reason the US might get away with printing more without inflation is due to world-wide demand for dollars in order to handle the debt they have denominated in dollars, particularly when circulation of the dollar is down.   Printing might extend and pretend in these other countries just long enough to make sure that we don't hit world-wide insolvency events, just creating smaller deflationary explosions in some sectors that don't get enough dollars to survive. This may make a future boom, but only after behaviors shift away from a conservative balance sheet (think how folks who lived in the great depression remained conservative in finance for the rest of their lives).  Still another story is that we will use less stuff like flights, cars and gas thus lowering demand permanently.  This would explain an asset bubble we're seeing at the same time demand for goods falls and thus deflation occurs.  A final story is that tech will continue to push inflation down.  This story can even be used as an example for why the inflation camp's resilient manufacturing story is wrong-automation will mean there are no/few wages in our on shore manufacturing and thus no inflation.

- David Rosenburg: https://youtu.be/NwyR8dU_i7M?t=902
- Steve Van Metre: https://www.youtube.com/watch?v=i85Y9VNQ-M8
- Cathie Wood: https://youtu.be/dynmtlO2_3c?t=1329
- Mike Green?: https://youtu.be/sjKU1ofV1nA?t=4241

"Bearishness" - Those who seem to think things are more likely to end badly than not; maybe stagflation, both nominal and real return down or maybe general deflation:
In some sense these folks just "smell" something wrong, be it a sense of a bubbly market, bitcoin craziness or bonds will push asset prices back down.

- Don Kaufman: https://www.youtube.com/watch?v=cYU0yWUKR28 (Note he is a short term trader but he has been mostly bearish from March of last year)
- Jim Rogers: https://youtu.be/txZpbZTzlyg?t=557
- Jeremy Grantham: https://www.youtube.com/watch?v=RYfmRTyl56w

Both:

These folks think the plumbing will cycle between inflation and deflation.  They solely point to plumbing.
- George Gammon: https://www.youtube.com/watch?v=XAAdwhxzhE8
- Steve Van Metre: (He seems to believe eventually this will fall apart, but he doesn't give a sense that it is coming soon, so no link).
- Mike Green?: He sorta-kinda thinks it will be both in that he thinks passive investing has been causing the market rise and eventually due to some unforeseen or possibly demographic issue, the market will pop and passive will make the system completely crash.  I don't think his predictions really enter into the wider economy regarding the overall outcome. See nearly any recent interview with Mike Green on this idea.

Thinking on measures of safety:

With this sort of variety of views, are their obvious defenses one can take up?  It seems to me there are financial, currency/collectables, and skill based efforts you can take on.

I suppose one simple hedge is having a mortgage while having cash in bonds, so that if either inflation or deflation occur, you'll be well positioned.  Another is to invest in unloved value plays not seeing big booms in the market, if you can find them.  That way if inflation happens, you're at least partly covered and if deflation occurs your bet should be relatively uncorrelated.  Russia perhaps?  Net-nets maybe?  Another possible choice is to buy a straddle if you believe one or the other will happen in an extreme. That is roughly Mike Green's solution.  Finally there are TIPS which could be used to hedge inflation.

Regarding currencies, since all currencies are seeing some level of printing, the obvious answers are either crypto or gold.  Perhaps some currency will devalue relative to gold, bitcoin or whatever.  Then the collectable element also makes sense since anything with scarcity can make sense.  Think of rare art, fancy bottles or whine, etc.  Even if things deflate, these objects should retain value relative to the purchasing power of the currency in the same way gold does.  The problem in my opinion is that it is too late to get into this world as it seems very bubbly to me, but that is my own take.

An alternate route from the money side is the skill set of solutions.  Skills that are both valuable and yet not capital intensive seem ideal in both inflation and deflation.  If hyperinflation does show up at the same time crypto-currencies have a death penalty attached to them, online sales would seem difficult, so in person skill is better.  Things like bicycle repair, music teacher or locksmith seem like good ideas.  If crypto is left alone, then of course online based work seems equally likely to work out just as well as in person jobs.

The Alpha Strategy tries to solve for inflation, but if done strategically, it could be reasonable for deflation too.  Granted you might lock in higher prices for things you need, but in the long run it won't matter much if you are going to use them and it might be a reasonable hedge anyway.  Looking at hyperinflationary periods, it seems most only last between a few months and a few years.

Summary & Open questions:

Wow, this went on long. I'm have been tempted to delete the entire thing, but kept it in case it is of value to some others. I know I skipped a bunch of folks from Harry Dent to Peter Schiff, but I tried to encapsulate their ideas in my summaries. Have I missed any major elements from both the ideas generated previously or the general analysis in the inflation/deflation debate seen in public? Once you throw in the idea that history maybe drastically different than our future, do the "End of Technologic History Thesis" and the "End of Personal History Thesis" requirements get violated by any of the above theses for inflation/deflation? What am I missing? I know level of inflation on a per-good and per-asset class basis is missed, but I think if we get that far down into the weeds this discussion would have exploded to insane proportions. Anything else I missed?

Qazwer
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Re: Examining Inflation

Post by Qazwer »

I might have missed the main stream argument of the not listed demographics to deflationary argument. Less workers and those that are around getting older.
Unless there is increased immigration, developed countries will have less people of working age. Models that give the US a better chance than other countries against that imply immigration.

white belt
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Re: Examining Inflation

Post by white belt »

@JCD

I think that’s actually a pretty good rundown that incorporates a wide variety of perspectives. The only other prominent deflationist I can think of that you didn’t list is Lacy Hunt.

Edit: Looks like you are all over some of my go to sources to stay up to date on this sort of thing like RealVision and Macrovoices. Grant Williams’ endgame podcast series also has some great insight, but the new episodes are now behind a paywall.


@Qazwer

Good point about population dynamics in the West. I think Raoul Paul has some good videos on RealVision from a couple of years ago that cover the aging population problems (though I’m not sure where he stands on the inflation/deflation issue at the moment).

JCD
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Re: Examining Inflation

Post by JCD »

@whitebelt I skipped Lacy Hunt as his last commentary was in May of last year. I don't know what he would make of the changes in the political environment, such as a possible $15 an hour minimum wages when he was predicting wage deflation back in April on Macrovoices. I think his ideas are mostly captured in my summary, but if I missed something of his, please note it.

@Qazwer I tried to capture that with Mike Green's thesis regarding demographics, but you are right that there is a deflation spin to the idea. Green thinks demographics might generate inflation and then rapid, massive deflation. "Like going up hill without brakes, you don't notice a problem... only once over the hill..." Peter Zeihan also sort of articulates some of this idea, but is different in that he thinks the last of the "boom" from baby boomers was wasted on COVID. He thinks we are now going back down hill to use Mike Green's metaphor.

One more element I missed was central banks moving into crypto space and applying in/deflation upon account directly based upon some top-down directives as captured by one uneducated economist: https://youtu.be/yAmGF3RJ7cg?t=347 . I don't know what sort of time frame that would be in, but "soon" would not capture the US version of this. A Chinese version might in fact show up soon, but that doesn't obviously have a particular predictable impact on US consumption/US dollars. It would vary on what rules the Chinese apply and to whom they apply those rules.

nomadscientist
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Re: Examining Inflation

Post by nomadscientist »

I don't see how inflation can occur until people start liquidating financial assets on a large scale to fund consumption.

The end of the deflationary effect of the pandemic may increase inflation a little, but unlikely to much affect the long term trend of saving versus consumption.

Inflation is likely to hit disconnected from its cause, unexpected, after more years of inflation hawks predicting the end of the world and being "proved" wrong.

JCD
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Re: Examining Inflation

Post by JCD »

While not mentioned much in this forum, I recall a lot of folks talking about food prices being a demonstration of significant inflation.  I was going through earnings call for some staples providers and nearly everyone of them had some comments on inflation.  I thought these quotes were interesting in how much of it relates to short term effects of energy, not enough labor and crop yield compared to longer term costs like the costs of setting up new manufacturing facilities or replacing machines.  Here are my select quotes:

"Outside of COVID-19-related expenses... inflation remained somewhat benign throughout a significant portion of 2020. However, we did begin to see inflation starting late in the third quarter and accelerating into the fourth quarter, particularly for freight costs, certain agricultural products, and other ingredient costs and packaging."

"...we see substantial inflation that’s already here in a number of places ...  price of vegetable oil or soybean oil has done in the last number of months and you can see that all of these commodities are ramping up very quickly. And frankly, I don’t expect any relief until the new crop rolls in, but the market will do what the market will do obviously."

"Early on in the fourth quarter we realized that due to crop conditions and co-packer capacity issues...  products would not meet the elevated demand we were seeing... We will not see meaningful relief in this area until the summer when the new crop arrives. Since we took that action we have seen competition take similar action. Not surprising, since we are all affected by a relatively poor crop last fall." [They noted elsewhere that many co-packers didn't have enough employees due to COVID]

"So it’s the same story in a number of our other sizable brands. ... The demand is huge out there. General Mills had announced that they were having trouble supplying. ... We have supply issues still..."

"So we feel like there is some pricing power out there. ... So I think as we look toward fiscal '21, you'll likely see less list pricing, just as inflation won't warrant it, it will be obviously a competitive environment and value will matter, but things like price pack architecture and mix will be things that we focus on. "

"Okay. So let me start with the first question on commodities. I think, we closed out 2020 with input cost inflation in the mid-single digits and this was mostly offset by the productivity right all the way through quarter four. I think we have seen grain and energy markets rebound sharply in recent months just on near-term supply, demand, and other factors. ... So I think in terms of total inflation for 2021, we expect that to be higher than what we've experienced in 2020, but still in the mid-single digit rates."

"We are expecting about 3% input cost inflation and continue to track to roughly that." 

- Earnings calls, between Dec-March. All bolding added by me.

Campitor
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Re: Examining Inflation

Post by Campitor »

Another article regarding CPI and inflation rates: https://mises.org/power-market/inflatio ... goal-posts
In calculating the index, price changes for the various items in each location are aggregated using weights, which represent their importance in the spending of the appropriate population group...

...Relative importance is nothing more than a plug. If Food was 12 and energy 8, no one could argue this was more or less accurate than, say, 14 and 6. Yet such a change would have a momentous effect on inflation results. Since it’s impossible to credibly quantify the level of importance of a good in even one person’s life, it’s absurd this is done for the entire country...

...The highly suspect CPI calculation is not so much a “conspiracy theory,” as it’s simply there are too many people depending on the low inflation narrative to stay afloat. The Fed, pension plans, unions, actuarial work, treasuries, etc. all rely on the low inflation narrative to avoid the negative consequences of our reality, including bankruptcy, or in the Fed’s case, the embarrassment of having to admit mistakes.

trfie
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Re: Examining Inflation

Post by trfie »

What are thoughts on the Chapwood index? Looks like the site is partially down right now.
The idea behind it is to look at the most common products purchased and a much larger number of them to give a better idea of inflation for the average person.

JCD
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Re: Examining Inflation

Post by JCD »

trfie wrote:
Thu Mar 18, 2021 12:33 am
What are thoughts on the Chapwood index? Looks like the site is partially down right now.
The idea behind it is to look at the most common products purchased and a much larger number of them to give a better idea of inflation for the average person.
I wrote a very long reply but lost it due to the forum needing me to log back in... :(  So here goes again...  You might enjoy these guys discussing all the indexes.  They basically are critical of Chapwood's construction, while attacking shadow stats for absurdly high inflation over a long run.  You might note that Chapwood has been claiming 8-12% inflation for nearly a decade, which makes it open to similar attacks as the shadowstats claims.  This implies 2-3x prices from 2012 to today and 8-9x 2012 prices predicted by 2030.  You can ask yourself if those numbers are right or not.  You can google grocery store ads to get prices from 2012-2015 and see if there double/triple price claims fit.  Just be aware those ads need to be compared like for like, both in terms of being a sale and from a similar store.  For example, one ad I looked at showed soda for 88 cents a bottle.  If I compare that to a Walmart sale of 1.25 I get 7% inflation while a Fred Myers sale price of 99 cents shows only a 2% inflation.  Typically soda goes for 1.50-2, which would certainly show some crazy inflation numbers.  

The short term measure of these price shifts and the difference in stores makes a proper measure hard, which is why my spreadsheet tended towards longer term trends.  It was also harder to find adverts from the 1990-2000s than older ads as the era isn't considered 'classic' yet.  Most folks outside the Austrian camp(*) who have issues with CPI claim CPI became political in the 1980s.  Some point to leaving the gold standard in the 1970s as the point of no return.  Even the Greenspan put goes back at least to 2000.  In all critical attacks of CPI, a long term inflation measure is as valid as a short term measure and in those cases the Chapwood index's 8-12% inflation claims seems pretty unlikely.  

Could 8-12% be true?  Well, at least from my research, we don't have the actual data to look at nor a deep methodology description, but yeah, sure, it could be. We don't even know if the pizza (an item listed on the index) was consistently the same brand, the lowest priced brand or the highest priced brand or using some other picking mechanism.  I'm not saying you can't get those results by picking certain baskets and weighing them in certain ways.  If you buy the Austrian argument that every individual is a special snowflake and there are no real groups(*), then the Chapwood basket is as valid as any other basket if the underlying numbers are true/valid and are compared in a like-for-like manner over time.  One last critical point is, maybe Chapwood is capturing recent inflation when prices didn't move for a long period.  For example, Chapwood claims inflation of 12% in Fresno, pretty much for the last 8 years.  Picking at random a house from Zillow which sold in 2005 at 330k then sold for 333k in 2018.  It is now for sale for 395k.  Let's assume it sells for asking price--given the market, it seems possible.  From 2005 to 2021 it was an inflation of 1.1% but from 2018 it was an inflation of 8.9%!  It went nowhere for over a decade then had a big pop.  This might be what the Chapwood index is pointing out large pops.  I did briefly look for a 2012 house sale but the nearest I found was a 2010 sale with a 4.6% inflation rate to today, assuming it sells at asking price.  If California housing is not showing 12% inflation, I don't know where Chapwood is finding their inflation.  I personally don't think the index is useful and I suspect it has construction flaws.  My importu spreadsheet and one off data collection is not enough to prove it, but I'd suggest starting with a position of skepticism based upon the little bit of research I have done.

(*)The Austrians School as I understand it: Don't believe governments should ever make general measures like GDP, etc. as we are all individuals.  That is much of @Campitors comment, attacking the idea of weighting that fit some hypothetical demographic, particularly if you don't believe in those.  The Austrian School also disagrees with the definition of inflation this measure has.  They also disagree with socialism as a concept and thus see no reason the state would measure inflation and even if they did, I suspect they would suggest using forward looking market indicators not past experiences generalized. It makes these sorts of discussions difficult to have when some groups think the measurement, methodology and problem it tries to solve are in and of themselves invalid based upon how they perceive reality.  But it is good to make sure their objection is noted, particularly if I'm going to claim one index or basket is better than another.

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