Unfortunately this is economic bullshit. They are taking a description of an economy that requires a constantly increasing workforce and increasing productivity and then apply the most obvious, ill-thought out short-term fix, and actually expect it to work despite violating the basic assumptions. Population growth stopped 15 years ago. Normally those people that weren't born would be entering the workforce in about 5…
> But productivity (amount of $ per hour of work) has been dropping for 30 years, What, what? Except for some years during the 2008~ financial crisis, productivity has been rising steadily all over the developed world. https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH In fact it would be very odd if it wasn't rising; it would mean all of the aggregate investment in machinery and office automation during the last 3…
But unless you agree that since 1990 people "deserve" less housing (and therefore don't see the less square footage for their rental/mortgage dollar as any kind of loss), less fuel, a lot less education. Then in 2000 it gets lowered again. We've gotten to the point that they call the current measure "PCE deflator". So unless you agree people now deserve less of essentially any and all capital goods, ...
This is the issue with government measures. Their claim is that they're just adjusting to what they're seeing, and the "underlying value" is the same. Yet when I offer an economist to provide him with a 10 year supply of tobacco if he pays for my PhD ... no takers (and that's generous, in 1980 it was just 6.8 years of tobacco for a PhD, and I think that included housing for 5 years). That's an investment yielding over 5% ! No takers. But ... I thought the underlying value was the same ? So I'm offering you something of what you claim is greater value for something of less value, and yet you don't take the deal ? Obviously something is wrong here.
They have an excuse, obviously. The reasoning goes like this: more inflation, without higher wages - people spend less measured in goods (in a few years even in dollars) - therefore the inflation measure must be broken (doesn't represent a realistic basket of goods anymore type argument) - inflation measure gets replaced with something with less of whatever got expensive, and less in general - goto 1. Result: inflation measure gets deflated by ~5% every 5 years. Substract that and productivity growth has been negative for decades. This matches people's experiences much better than the figures, so I'm not really willing to accept the PCE deflator.
So these official figures neglect to state that "real" is calculated using about a different inflation measurement every 2 columns. Not totally non-overlapping, perhaps, but different. And despite the repeated claims that they're just changing it to reflect what people buy it always changes in the same way ...
Needless to say, for specific inflation measures, productivity is disastrous. For instance, take square footage real estate per hour worked. Gold in kg per hour worked. Those sorts of measures. They look really, really, really bad.
And for what should be the real inflation measure, the total amount of money, which is total credit + M1 supply, and calculate what portion of "the world economy" you get for an hour of work and see it evolve over time ... blimey.