Examining Inflation

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Qazwer
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Re: Examining Inflation

Post by Qazwer »

@white belt - of course there is - the baby with the bath water problem exists though - it is political, it is domain specific, it in other words sucks - but it sucks less than let inflation eat into these things without any adjustment
If we think giving people money for years is a good thing - if we think that paying for stuff at a national level is a good thing - then some form of adjustments for over time is a good thing
Should we debate how to? Yes
Should we understand its abuses? Yes
Do we have something better? No

In summary - it sucks but it is a modern marvel that is awesome and I am glad it exists and is used

JCD
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Re: Examining Inflation

Post by JCD »

Sclass wrote:
Fri Feb 26, 2021 9:39 am
I have ten goats. You have two. Relative or absolute?
Regarding the goats, those two measures are absolute, assuming we have specific goats and not "goat-like" proxies, say goat futures. The second point is can we compare my two goats to your ten, and I would say they are not comparable. You are not 5x more wealthy than I.

Wealth being the absolute amount and specificity(*) of the objects you own. The problem is that wealth is in and of itself not absolutely comparable. We might talk about two tracts of land and how they are mostly equal (size, soil nutrients, tree coverage, etc.) but when one experiences a forest fire and the other doesn't, that considerably changes things. We might have trade tracts of land at first, judging them to be the same, but that is about valuing the wealth, which is where you say they are relative measures. The fact that the fire then comes in and leaves one of us with a change in wealth and possibly different values after the event implies again a relative measure. However, I contend wealth is not philosophically comparable, wealth is purely about the summation of ownership.

Humans have a need to compare, so we use a imperfect system called money. Money makes things comparable, but the values of money are not absolute. It is common thus to use the dollar value of all the wealth one has and claim that is wealth. E.g. Musk is the most wealthy man because of the number of shares of Tesla he owns and the dollar amount attached to them. I agree this is a common usage of the term, but I reject that for any formal discussion of wealth. Not only is it obvious to anyone who knows markets that if he were to sell all of his shares, it would impact the stock market, but the value of Tesla is a current perception, not an absolute reality. In reality the wealth we can discuss is the percentage of bricks of the Tesla factory Musk owns, the rights to control the business, etc. etc.

Of course if you want to go really deep you have to question if rights/ownership are wealth, as they only are enabled as long as a collective allows them to be enabled. I grant that sort of metaphysical attack on my concept of wealth is valid, but then we really do start get into the weeds. Perhaps if we then agree that wealth is enabled by culture/society and in that sense wealth is relative, I might accept that. That does not seem to be the gist of your argument, but I figured I should point it out for completeness sake, as I was the pedantic one to begin with.

(*) Admittedly, there are limits to this. Goats lose skin cells and no one says, "hey those are my skin cells on your property!" On the other hand, mating rights for some species is big business. However, in the common vernacular I would contend that if you can point at the goat and legitimately claim "mine" it is an absolute claim.
Sclass wrote:
Fri Feb 26, 2021 9:39 am
Why can’t anyone come up with a figure on Google search for “what is considered wealthy”?
Inflation? :twisted:

Even if I use the common usage of wealthy, converting all things to cash at market value and ignoring the person involved (e.g. Ignoring being healthy as part of personal wealth to the chagrin of Ralph Waldo Emerson), I agree that wealth is a relative game. One could say something like the 20th percentile of a given social circle and probably be pretty accurate in a absolute way and given that google knows more about you than you care to think of, I wouldn't be shocked if one day google did give you an absolute answer. I'd say the reason is limits of the technology.

I do get your larger point, the wealth of kings of old is not much in many factors compared to say the wealth of the middle class today and thus wealth, what it is and how it is measured changes. Even trying to convert wealth into money is difficult. The fact that you can demand music at nearly any point from millions of singers is an amazing wealth, but I don't know how to convert that into comparable dollar terms of the kings of old. Or what is the dollar value of the ability to save a life via modern medicine vs the kings of old? Ordering an enemies death certainly could be an advantage for the kings of old though. So in that sense, power, health and wealth all get mixed up into one thing and to that extent, maybe we can never define wealthy.

I do feel this is going off topic fast, so I'm going to leave this here unless you have any other insights.

JCD
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Re: Examining Inflation

Post by JCD »

white belt wrote:
Fri Feb 26, 2021 3:29 pm
Do you agree that there is huge political incentive to downplay inflation numbers? Inflation upsets the masses and means you will have to increase payments of over-promised entitlement programs that are already a huge liability. Even downplaying official inflation numbers by a few basis points means substantial savings to the federal government in paying out entitlements.
It would seem to me that the government isn't all of one mind around this issue:
"Many find it counterintuitive that the Fed would want to push up inflation ... However, inflation that is persistently too low can pose serious risks to the economy." - J Powell

"...can lead to an unwelcome fall in longer-term inflation expectations, which, in turn, can pull actual inflation even lower, resulting in an adverse cycle of ever-lower inflation and inflation expectations." - J Powell

"To me, a wise and humane policy is occasionally to let inflation rise even when inflation is running above target." - J Yellen

"I was on record then [1996] as saying that I thought we should adopt a numerical inflation target, and that I thought it should be 2 percent. I think I articulated the reasons about the zero lower bound and nominal wage rigidity that later became central to our decisions. Alan [Greenspan’s]view was that we should not adopt an inflation target at all. And, of course, he was successful in stopping that from happening until you [Ben Bernanke] and I worked together. I think it had long been your desire to see this happen as it had been mine, and I think you especially should feel proud that you were able to put in place what I think has been a successful framework." - J Yellen

I also don't know if the government even all agree on how inflation works or how to create/limit it:

"I see the standard framework that sees inflation as being largely determined by inflation expectations, slack in the labor market, and slack in a variety of supply shocks, as a reasonably sound framework for thinking about inflation. And I don’t think that it’s exhibited massive failures in recent years. Yes, inflation has been now for many years below 2 percent. Such a framework would have attributed that to, first, a lot of slack in the labor market, plus plummeting oil prices and an appreciation of the dollar. So for many years, low inflation has not been mysterious in terms of its causes. In 2017, the model saw no reason for inflation to be as low as it was, so that was a negative error term. In 2016, exactly the opposite was true: inflation hit 2 percent, the model didn’t expect it to be at 2 percent. Of course, there are errors. I’m not saying that we have a perfect understanding of inflation. There are a whole variety of shocks that cause actual inflation in any year to depart from the predictions of the model. But it’s not as though the errors have all been one-sided in a way that would cause you to say this model just isn’t working, we really need to rethink it." - J Yellen

Qazwer
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Re: Examining Inflation

Post by Qazwer »

Ok let’s tie in inflation, wealth and ERE
Nominal $8,000 in 1950 is $86,832

A genie gives you $8,000 a year in 1950 without inflation. It is an evil genie. He knows about inflation. He tells you that you have to spend all of it every year. You cannot get any other money (cue crackle - or Monty Burns excellent)
But you believe in economics (which has not been invented yet but you are really smart) - you understand inflation is specific - you realize somethings will deflate while others will inflate - you subscribe to at least a form of End of Technologic History Thesis - I do not need new dangled stuff - I am a creature of 1950 and I know how to sow my clothes if they get a hole in it - I will not need to buy new clothes every time they get a hole in them
I live in 1950 - I live in a 1950 size house - I even have no issue with multi generational living

I can live a solid middle class lifestyle for the next 70 years?

Also throw in recent thread book smarts vs street smarts - I do not need to determine the optimal web - I just need my 1950 sensibility and ask come on really? ( anachronistically using that phrase) a lot
I can fix some basic stuff - I can do some basic building stuff - nothing fancy but good enough to hold up some things
I live in a community - plan to stay here - can make some friends - they do not charge me for doing ordinary junk that anyone living here would do for someone else - you know I would help them out too if they needed something
Last edited by Qazwer on Fri Feb 26, 2021 5:39 pm, edited 2 times in total.

JCD
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Re: Examining Inflation

Post by JCD »

Campitor wrote:
Fri Feb 26, 2021 11:26 am
You yourself suspected something was fishy in Denmark in regards to CPI or why would you even bother starting this thread? My own belief is that CPI is underreporting inflation for anyone who isn't the average urban consumer or within the 14,500 families surveyed.
Truthfully, I thought inflation was near enough, perhaps +/- 1% but had the feeling my lifestyle was interfering with my view. I have tracked my spending on every grocery run, for every location I have been inside and outside the united states for the past ~2 years and I don't see any clear pattern other than the say the US seems more expensive than Europe. My grocery expenses in Athens Greece near exactly match my expenses in South Carolina, for example, even though they are a year apart in time (Athens was slightly more expensive by ~10 cents a day but was a year earlier, implying deflation). The fact that my expenses are idiosyncratic does not surprise me, but the uproar of folks like you denying it is the case interested me. I cannot deny asset prices and materials are going up faster than CPI, either, so that too interested me. Even if I throw in leverage and low interest rates for justifying asset prices, the inflation of materials like copper is impressive. It isn't even something robin hood speculators would likely invest in. So sure, I find this all interesting, but I don't have any reason to suspect CPI isn't a reasonably useful tool based upon my experiment or experience.

Campitor
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Re: Examining Inflation

Post by Campitor »

@ JCD

The problem with tracking food supply inflation in the US is in regards to the amount of subsidies the government provides; it's in the billions. Food would be more expensive if it wasn't for these subsidies. CPI tracks food increases but doesn't factor the cost to taxpayers.

white belt
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Re: Examining Inflation

Post by white belt »

@JCD

But wait the Fed is an independent agency separate from the rest of the government ;)

I don’t think inflation is some sort of bogeyman because I have a foundational understanding of economics and have structured my portfolio to succeed in variety of economic conditions. My issue is that to the masses who have no economic understanding beyond the increasing prices they see, unexpected inflation can indeed seem like a bad thing. The USA also hasn’t seen secular inflation since the 1970’s, which means boomers and older might be the only people with any recollection of such a time. This has the potential to set off more social unrest.

I get that inflation actually benefits debtors and wage earners, which means many on the lower end of the socioeconomic spectrum may actually benefit from it over the long term. But the USA doesn’t do a very good job of communicating that narrative, which also assumes those people have jobs and aren’t just relying on government stimulus or subsidies.

I have no faith that the Fed understands the first or nth order effects of anything it does (check out Danielle Dimartino Booth’s work if you want a glimpse into the inner workings of the Fed). Having said that, it’s still probably the most prudent central bank of any western country. I think if we get inflation like the 70’s then the Fed is going to take a ton of heat and fold on its inflation targets, just like they folded on raising interest rates in 2018 (see Powell Pivot). Even so, inflation isn’t a thermostat that can just be turned up and down at will.

Qazwer
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Re: Examining Inflation

Post by Qazwer »

@white belt - I think that most people ignore average inflation and its import over enough a period of time - a couple of percent adds up - a dollar in 1990 is two dollars today (100% change) - I think a lot of my thought process is watching people live good lives in ‘fixed income’ post retirement - making it work - but it requires you to pay attention
CPI changes is not perfect but increasing SS is huge (not everything as this board knows)
You need someway to tract inflation

JCD
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Re: Examining Inflation

Post by JCD »

@Campitor

Before going to SC, I was in a little town in Indiana for about 45 days. My food expenses were nearly 50 cents lower per day in Indiana vs SC. Sans local subsidies I don't see how taxes could be an impact in this case. This is of course not statistically sound data, but it gives the impression that costs are lower in rural America. Add to that a fed working paper suggests there is no significant difference between urban and rural regarding inflation in the long run. Of course this doesn't ensure that inflation is lower in rural America today, but it does imply inflation isn't some monstrous beast eating non-city dwellers alive.

@white belt @Qazwer

In general I don't think the federal reserve is specifically related to the accuracy or inaccuracy of the CPI in regards to what they measure, however I did find an article that might cause me some doubts on that view:
"Normally, economists expect rents and home prices to move together in a given community. That’s because both respond to the same underlying conditions — a strong labor market, popular amenities, proximity to the ocean. When rents and home prices start to diverge, that’s usually a sign of something amiss, like a housing bubble inflating." - https://www.nytimes.com/2021/02/26/upsh ... -gone.html
I quote the above NYT article because it might capture one way inflation might be getting hidden.  Here is the BLS explaining how they calculate home price inflation:
"Housing units are not in the CPI market basket. ... Shelter, the service the housing units provide, is the relevant consumption item for the CPI.  The cost of shelter for renter-occupied housing is rent. For an owner-occupied unit, the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes." - https://www.bls.gov/cpi/factsheets/owne ... d-rent.pdf
Regarding Ms. Booth, I am very aware of her extremely pro market views as well as her anti fed views.  I prefer Jeff and Emil for that sort of analysis as I think they are a bit more reserved on the political front, but perhaps that is just taste.

My effort to understand inflation and the components was less to do with what the future of inflation is and more to do with the idea that the gov't cpi has been lying about inflation for the last n years, like how alternative indexes (e.g. shadowstats) imply.  If shadowstats was even remotely accurate then you would conclude assets like gold were not very good inflation hedges.  Given silver/gold's alleged inflation fighting properties did not seem to be responding to what some folks are alleging right now- high[er] inflation, it is worth asking if the measure is working.  I thought it would be interesting to explore if inflation really did look like many of the alternative indexes claim inflation looked like and thus built a spreadsheet.

I would say from my exploration, CPI seemed pretty accurate or when CPI failed, it still seemed to be more likely than not in the inflation rate was sub 4%, which is near enough in my mind.  If I was to be convinced there were real failures of CPI I would need to find obvious larger price trend increases in some bigger categories.

In my review, there were a few notable exceptions, particularly healthcare, rent and cars.  The car I measured was about 5% inflation and given the fancy new gadgets cars get and much longer life, I could legitimately imagine a CPI egghead adjusting it down from 5% to 3%.  If you need to repair your car less frequently and need to put less gas into the car, that might further justify the shift. 

Healthcare was at 7% although I admit I am less sure of the data on this one.  If I was to accuse CPI of spewing falsehoods, healthcare is where I'd point the blame.  However, it does seem like nearly everyone knows healthcare is going crazy expensive and if shadowstats is saying general inflation is 8-or-9-or-10% a year, above my long term trend of healthcare, it becomes painfully obvious shadowstats must be wrong. Still it is high and maybe this is a legitimate place where the government is suppressing, but even if I doubled the impact of healthcare, it would only increase inflation by about 1%.  Furthermore, could healthcare be fixed?  Yes, if we believe any other large wealthy country's statistics, so even if CPI is wrong due to healthcare, it is only wrong because of wasteful health care expenses.

The example of rent I provided is also at 5% inflation, but given that home sizes in general have increased, I again can imagine the CPI eggheads adjusting it down to 4%.  In fact, in the link I provided previously, they cite a place in Silver Springs Maryland which only saw 4% inflation from 1958 until now (they had an ad from 1958 they posted).  Given the variability of real estate, I don't think that saying  4-5% is too far off. The fed claims ~3.7% from 1958 until now, near enough in my eye to 4%. So 4% rent and 7% health care might raise an eyebrow, but then there are all the deflation items like cell phones, computers, entertainment, etc.

We can argue if CPI is right or if a fixed 2-or-3-or-4% a year would be a more accurate estimate, but CPI is a tool that seems reasonably to reflect reality of what it claims to measure, at least up until now. So far I have seen no empiric challenge to this basic claim, only philosophical disagreements with its existence or use, debate about its accuracy for sub groups or fears it will be wrong in the future. I do not mean to dismiss these, but they are not the challenge I was trying to tackle. I wanted to know if CPI does what it says on the tin and it seems to.

So why so many accusations of lies or inaccuracies regarding CPI? Some of it is the recent money printing or the asset bubbles we all see, but I have seen these sorts of "CPI is a fraud" claims for years, perhaps decades. What I conclude is similar to what Elizabeth Warren said in a 2007 presentation (I saw this years before she became a politician, right about the time 'bazooka money printing' became an inflation scare).  I think that the reasoning CPI is felt to be a lie is because the expenses that a typical family believes are flexible have gone down while the so called inflexible expenses have gone up. That is to say, spending on rent, cars and healthcare went up while computers, phones, clothing and electronic toys went down.  This may make a lower priced basket, lowering the inflation rate but it doesn't feel lower, to say nothing of wages stagnation for many.

Jacob of course throws that all on its head by changing how, what and why you spend and that to me is one of the core elements of why ERE style FIRE works, you avoid high cost, high inflation expenses. However ERE does still spend money and that at least is one of the possible ways ERE could fail or be impaired in the future.  That is to say, what if inflation stayed at 3%, a gold inflation hedge would do nothing special, as the inflation for cars and healthcare went up at 1% while lentils went up at 20% a year?  Your inflation hedges might not work unless you hedge very specifically. This to me is the value of thinking about a ERE-specific style of inflation risks rather than debating if CPI got the decimal place right. @Hristo Botev gave a great example with how even if their inflation was not impacted, their social capital might be impacted by inflation. I would love to hear other ways ERE might fail due to unexpected inflation problems, even when properly hedging against general inflation. The thing is, you can't hedge risks you don't see and I want to have less of those if possible.

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Alphaville
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Re: Examining Inflation

Post by Alphaville »

JCD wrote:
Sun Feb 28, 2021 5:32 am
I would love to hear other ways ERE might fail due to unexpected inflation problems, even when properly hedging against general inflation. The thing is, you can't hedge risks you don't see and I want to have less of those if possible.
since ere is dependent on "renaissance skills," the most glaring point of failure is health and disability. your personal economy is tighly coupled to multiple aspects of your mind and body. so any form of diminished capacity will increase your cost of doing ere business. from a temporary acute illness that might impair you from heating your home with firewood, to arthitis which may impair your ability to perform basic tasks, to cognitive decay which may impair your ability to recall or process information and make sound decisions.

someone like the late stephen hawking was by necessity a careerist that had to use his comparative advantage in math and physics to maximize profit which could then be spent to provide in other areas like cooking and basic body care. i don't know to what extension he was dependent on his nhs, but his condition wasn't one that could be treated with diet and exercise. someone like that in the usa would need good group health insurance (usu. from employer)

similarly, someone might have (or develop) conditions that prevent them from building sufficient social capital (autism), engage in certain types of projects (adhd), pursue homeotelic goals (simple contradictory desires or various clinical conditions) etc. so frictionless reliance on skills is only theoretical.

with monetary income coming from financial assets there are also changes in taxation, from capital gain taxes, to taxes on financial transactions such uncle bernie likes to propose from time to time, to others i can't think of right now. at this time in the usa we have historically low capital gains taxes--this might change, not sure how or who for.

same with property taxes, or eminent domain which may deprive your of your home, or changes in your homeonwners insurance & liability rates, etc.

and speaking of liability of course the risk of lawsuits migth increase if you hang on to old tech, e.g. your 1950s car fails to stop in the rain and kills or disables a high income person with a large number of dependents.

on the other side of that coin, i've never been in a bicycle accident (knock on wood) but in this very forum i keep reading stories of cyclists getting hit by cars, eg @suo or @hristo botev. in my state, not only do we have an abundance of uninsured motorists and hit and runs, but also drivers rarely get blamed for hitting cyclists or pedestrians, so i doubt i could collect damages if i were a victim of my refusal to drive a car everwhere. hence i depend on disability insurance rates which increase with age and might not be enough for all contingencies.

then there is the cost of having to recouple to the economy when impelled by necessity. e.g.the classic example of the parent who leaves the workforce to raise children and returns years later at (sometimes dismally) reduced earnings. or the failed homesteader who upon returning to a city with a massive resume gap needs retraining in order to obtain paid work. the diminishment of business/professional competence + networks is a form of asset depreciation that occurs when you retire. it stays on paper as long as you remain retired, but retire prematurely and you might realize that loss.

so you costs are bound to vary in the course of a lifetime, but im not sure these personal scenarios can be described as inflation proper which is a macroeconomic concept. so without getting into unfathomable precisions about unpredictable futures, there has to be a hedge for when the cost of decoupling from the economy increases or becomes untenable (this is why i like semi-ere).

Qazwer
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Re: Examining Inflation

Post by Qazwer »

Normal aging is huge from all the processes that Alphaville mentions. We no longer live in multi-generational households. The classic example is the old couple who lives together for 70 plus years. They each rely and learn to compensate for the other’s weakness. After one dies, the other often cannot go on. As well, there friends have died or moved closer to their kids. It is easier to make friends when younger it seems (community - social capital). Their neighborhood has changed (not always better or worse just different). Their neighbors are friendly enough but it gets harder to get to the supermarket - which might or might not have moved. They can sometimes get rides etc
Then there are family dynamics of the kids, grandkids and feelings of not wanting to be a burden to some who might have moved thousands of miles away to take advantage of economic opportunities.
Then you have the hedonic adaptation of life. I would never want that life or willing to trade my life now for lesser life then - because it would be in your mind now. But most people adapt to that life and are relatively reset in happiness levels. You have to be willing to make a trade for an unknowable future self for both yourself and potentially your family ( although this suffers from the ‘what about the children’ fallacy)
Inflation will tend to increase. But with substitution effects this can be mitigated.

Summary so far I think
Due to the construct of generalized inflation but specific inflation and deflation of various goods (to the degree a person in ERE remains coupled to the market in present and in future) with the ability of substitution given those relative inflation and deflation in cost
ERE requires some form of Jacob’s End of Technologic History Thesis upstream (my attempt to summarize his argument that none of the new toys of the last 50 years have been that new or important in living the good life or at least canbe chosen amongst at not a ridiculous cost)
And
Alphaville’s End of Personal History Thesis in some formulation - as you age you do not change enough to make it unsustainable - the degree of generalized market coupling is not an overwhelming function of age
Both seem reasonable and potentially solvable, yet still to be considered at the individual level.

Riggerjack
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Re: Examining Inflation

Post by Riggerjack »

BTW @Riggerjack rightfully called me out on
Sorry. Not my intention.

When someone puts together a great post describing a blind alley I have explored, I try to describe what I found, in my exploration.

This doesn't mean that is all there is to be found, nor am I trying to stop anyone from exploring. Rather, I am trying to describe what I found, to save you time/energy. If you see something other than what I describe, so much the better. Tell me what I missed!

But please try to understand that I am autistic, and "tone" of communication is an area I struggle at.

This has been a fun thread. I haven't had much to say that hasn't already been covered, so I haven't posted anything yet.

What I will say is the OPs measure, trying to capture the difference between inflation and CPI is really ambitious, but I doubt the lessons learned are easily translated. The value is in the modeling, and seeing the results, rather than in the results. If that makes any sense.

Not having dug into CPI in about a decade, what I remember, is that it is pretty good for what it is. If it doesn't reflect what someone is looking for, there are many inflation gauges, many versions of CPI. Find the one that is closest to the one you are interested in, and compare/contrast.

For those who think CPI is wrong/manipulated/political, you may be right. But more in that the measure is used politically, than in the tool is wrong. If that is the case, one's issue is a political one, not an economic or statistical one.

For those who want to hedge a currency problem, by capturing a greater range of currency variability in their projections, I would suggest that the correct hedge is another form of capital, not corellated to cash values.

This suggests an interesting side question: In times of economic distress, how are each of the classes in the Gervais model affected? Given the different resources and means of support, how is each going to react? How can one benefit from understanding what other's are trying to do to adapt?

Hint: when currency is devalued, currency is not the tool one wants to use at this time.

Qazwer
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Re: Examining Inflation

Post by Qazwer »

@ Riggerjack - when I meant you called me out - I was stressing rightfully - meaning thank you
So if not clear
Thank you Riggerjack for pointing out what I had missed in a different thread - it was helpful

Toska2
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Re: Examining Inflation

Post by Toska2 »

I wonder how much inflation has been due to increasing-decreasing standards.

I can easily buy a 10 year old car with six air bags for cheap that will last 100k but those wool coat and pants are a luxury now.

To fight inflation what would I buy rn?
$100 - goodwill clothes
$1000 hobby stuff. 3d printer or a kite wing. keeping the mind or body sharp + expand social group. Web of goals stuff.
$10,000 college to expand prospects
$100,000 I dunno. Land might be getting cheaper with pine beetles and aging boomers. Wait a few years.

Qazwer
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Re: Examining Inflation

Post by Qazwer »

College has been increasing at a rate faster than general inflation. But portions of education have been plummeting. Those that suffer from Baumol disease go up in cost. But you can take a course on Coursera taught by the same professor for the cost of the internet connection and playback device both of which are decreasing faster than general inflation
3 D printers are deflating in nominal costs over time. The longer you wait the less they will cost.
But if you are buying education to gain the signaling benefits of having college so you can convince someone to hire you - then it is more expensive
If you want the 3D printer now to improve either employment or fun now, it is more expensive
The issue IMO is that you need to more tightly define the goals and see how the objects interact with general inflation.

Campitor
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Re: Examining Inflation

Post by Campitor »

Riggerjack wrote:
Sun Feb 28, 2021 3:44 pm
For those who think CPI is wrong/manipulated/political, you may be right. But more in that the measure is used politically, than in the tool is wrong. If that is the case, one's issue is a political one, not an economic or statistical one.
That's my point - CPI is being used as a benchmark for many things that it was never intended for. The general public, who has never bothered to study CPI in depth, has a misguided idea what CPI signifies and erroneously thinks there's nothing to worry about. It's akin to experiencing a mild summer and thinking Global Warming is a myth as a result. The politicization of data is giving the public the incorrect impression.

The public has to expand their field of vision beyond CPI to calculate what they may or may not need to do to secure their future.

@JCD

Food may have been cheaper where you traveled, but perhaps median salary is also lower. Cost of living is also lower in the suburbs depending on the nature of the suburban and its income bracket.

Not all suburbs are the same and some experience higher unemployment rates depending on the type of suburb it is: https://www.brookings.edu/wp-content/up ... report.pdf
These statistics together belie the notion that big cities have cornered the market on the family
and community distress accompanying rising unemployment during this recession. More so than
the last recession, suburbs have felt the effects of this downturn alongside primary cities and core
urban counties. The trend is fairly consistent across regions, with Western suburbs generally
faring the worst. Exurbs have been hit particularly hard by this recession, perhaps owing to their
economic reliance on a battered housing market. Lagging enrollment increases in food assistance
programs there point to a possible gap in safety net access.

7Wannabe5
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Re: Examining Inflation

Post by 7Wannabe5 »

When considering relative changes in lifestyle over time, I think it is important to consider changes from rural towards urban and also educational/class mobility. For example, along my paternal line, my family has resided in the same region of the U.S. and held upper-middle-middle class urban lifestyle since late 19th century. My grandparents were 1920s/30s version yuppies. They had outfits for tennis, vacations at the lake, maids to help with the housekeeping even though my grandmother retired from her brief nursing career after marriage, lovely brick Tudor house with rose garden, modern radio in the living room, etc. They only had 3 children, because although my grandmother was of Irish Catholic heritage, my grandfather was not. My father lived at home until he was 30, drove a sports car, smoked Kools, drank Tom Collins, listened to jazz, played poker and belonged to a stock investment club. He often claimed that nothing had materially changed for the better since his childhood in the 30s/40s. My point being that I think that it is easy to get caught in this trap of thinking that nothing has improved once you or your family has achieved urban middle class status.

Also, the most economically significant invention of the past 50-ish years has been uniform shipping containerization. That's why the median global income is now up to around .5 Jacobs which is right around the level necessary to preclude generational fall back to level of true food insecurity/risk of starvation or severe malnutrition.

IOW, there was obviously something inherently elitist about my father's take and there is also something inherently elitist in low tech/locavore movement, however appealing it might be for many other reasons. This is also relevant to gender roles and relations because modern feminism requires a certain base level of technology and affluence. For instance, my urban professional paternal great grandfather could afford to divorce and then marry a second wife around 1915, but my great-grandmother couldn't "afford" the practice of polyamory, but I sometimes can because technology has improved my lot relative to hers. Obviously, the other huge change that has occurred over the last 50 years, which is not accurately reflected in indices such as CPI or GDP is the massive influx of middle-class women into the full-time work force. In the middle class suburban neighborhood where I lived in 1971 (age 6), there was only 1 working mother on my entire block. This is actually something that the wealthy do still fairly frequently "buy" for themselves.

Riggerjack
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Re: Examining Inflation

Post by Riggerjack »

The politicization of data is giving the public the incorrect impression.
I see this too. But I see this everywhere. What makes CPI more important than the other misinformation?
The public has to expand their field of vision beyond CPI to calculate what they may or may not need to do to secure their future.
Well, given the distribution of resources the public controls, I don't know that this is true. Most people control little or no financial capital. What relevance does CPI have to such people? Those who do control resources, are generally aware of inflation risk, if they have any interest in asset management. If they don't, (typical 401k owner, with funds chosen by name or last year's performance) what good is knowing that there could be a discrepancy between personal inflation vs calculated inflation?

Misuse of CPI still seems like a political problem. One unlikely to gain much traction with the electorate until after it has diverged greatly from experience, for a while.

And again, I stress that the hedge against currency issues, probably shouldn't be financial.

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Alphaville
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Re: Examining Inflation

Post by Alphaville »

time value of money: if it's true that "one today is worth two tomorrows," what we have right now is massive deflation :lol:

Campitor
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Re: Examining Inflation

Post by Campitor »

Riggerjack wrote:
Mon Mar 01, 2021 10:53 am
I see this too. But I see this everywhere. What makes CPI more important than the other misinformation?
The whole is greater than the sum of its parts. CPI is a part in that sum. CPI is one of the bullets in the machine gun ammo belt of disinformation. CPI is a talking point among many other economic talking points meant to lull the consumer into the slumber of consumption and dependency.
Most people control little or no financial capital. What relevance does CPI have to such people?
None because they've been lulled to sleep and are unaware of the molly wop coming their way when economic reality doesn't match the economic fantasy they've been told.

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