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Inflation Truthers

awealthofcommonsense.com

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Re: Inflation Truthers

#11

Post by aetherson »

allendoerfer wrote: post #7

One gotcha about how inflation is calculated (at least in Germany, I assume it to be the same in the US), is that they try to compare identical products. So if this years cars do not have air conditioning, but next years cars do, the prices can increase accordingly without showing up as inflation, because you are getting "more car for more money". The problem appears at the point, when there are no cars without air c…

This is the same in the US, yes. And it's still the correct thing to do.

Inflation can't be a measure of every dimension of economic hardship at once. As the article points out, healthcare has risen in cost dramatically more than most other things. Does that mean that somehow the inflation rate must reflect the pains of those households not in the average and aggregate?

Less capable goods may no longer be available. You can no longer purchase a Model T, and must purchase a car that's faster, safer, more comfortable, and more reliable. Even if you don't particularly value that, your car objectively is faster, safer, more comfortable, and more reliable. The inflation rate can't change because your preferences are for a cheaper, but inferior good.

Re: Inflation Truthers

#12

Post by mlthoughts2018 »

iguy wrote: post #9

It's a bit confusing what he's arguing against. But his 2nd-last graph is the good one, [1]. That's only 20 years but [2] is the same thing since 1950. Some things have become much cheaper, other things have become more expensive. Attempting to summarize that in one number seems like it hides more than it exposes, no matter what number you pick. [1] https://awealthofcommonsense.com/wp-content/uploads/2021/01/... [2]…

The final graph on median home mortgage payments is misleading too. That can be propped up by REITs and increasing institutional ownership of consumer homes.

There’s also the issue of more millennials living with parents and relatives, unable to afford their own homes, which can be hidden in that.

Definitely can’t conclude from it that wages and purchasing power have kept up with mortgage costs.

Re: Inflation Truthers

#13

Post by dahfizz »

allendoerfer wrote: post #7

One gotcha about how inflation is calculated (at least in Germany, I assume it to be the same in the US), is that they try to compare identical products. So if this years cars do not have air conditioning, but next years cars do, the prices can increase accordingly without showing up as inflation, because you are getting "more car for more money". The problem appears at the point, when there are no cars without air c…

This is a fundamental problem with inflation calculation. How much would an iPhone be worth in the 1800's? How much would the Federal government have paid for a gigabit internet connection 100 years ago? Considering they spent tens of millions of dollars developing the Arpanet, I would say that the cost of internet has fallen dramatically.

Inflation calculations are only meaningful over short time periods. When chained over decades and centuries, we may as well be comparing two foreign currencies and societies.

Re: Inflation Truthers

#14

Post by jdblair »

rjmunro wrote: post #4

I'm not saying the article is wrong in general, but I don't get this last bit: > The government isn’t suppressing the “actual” inflation number. And if they were, they would also be suppressing reported economic growth... Surely by suppressing inflation they are increasing reported economic growth. If the dollar value of the economy increases 10% with no inflation, then that's 10% growth, but if inflation was also 10…

I think his point is that the same source numbers are used to calculate both inflation and GDP. If you suppress inflation by undervaluing goods and services you also suppress GDP. You could get away with divergence if your didn't provide your data, but at least in the US, you can see all the input data.

Re: Inflation Truthers

#15

Post by nahname »

mlthoughts2018 wrote: post #10

I found the “Price Changes” graph about 2/3 down the page really alarming. Virtually all of the gains in the form of lowered prices are purely in discretionary consumption and subsistence goods. Cheap entertainment, toys, staple foods. Meanwhile the insane price increases are in critical needs, medical care, housing, college education. In my mind that graph is pretty strong evidence that there really is massive infla…

All of the low inflation items are also goods that can be manufactured overseas.

Re: Inflation Truthers

#16

Post by _Microft »

> https://awealthofcommonsense.com/wp-content/uploads/2021/01/...

Also: the items in the category with decreasing prices are almost all automatically mass-producable and will have the advantage of learning (i.e. increased production efficiency and decreased cost with increasing number of items produced) while the ones in the other category aren’t necessarily. Childcare/nursery isn’t going to become cheaper just because you’ve more experience with the job.

College textbooks really stand out though. These should not have to become more expensive. They are written once and printed cheaply thereafter. I wonder what the curve for other types of books looks like but my guess is that other books have not seen these increases and this is purely money-making.

Re: Inflation Truthers

#17

Post by peteradio »

aetherson wrote: post #11
allendoerfer wrote: post #7

One gotcha about how inflation is calculated (at least in Germany, I assume it to be the same in the US), is that they try to compare identical products. So if this years cars do not have air conditioning, but next years cars do, the prices can increase accordingly without showing up as inflation, because you are getting "more car for more money". The problem appears at the point, when there are no cars without air c…

This is the same in the US, yes. And it's still the correct thing to do. Inflation can't be a measure of every dimension of economic hardship at once. As the article points out, healthcare has risen in cost dramatically more than most other things. Does that mean that somehow the inflation rate must reflect the pains of those households not in the average and aggregate? Less capable goods may no longer be available.…

The problem then is that "inflation" should not be used to argue that a large block of people aren't getting the shaft. That seems to be the most common exercise in citing inflation.

Re: Inflation Truthers

#18

Post by throwaway0a5e »

melling wrote: post #2

“Cars last longer, require less fuel to operate and are better for the environment.” That emissions chart looked good. Half as much as 1970. Too bad we have 5 times as many vehicles There were 250 million vehicles in the world in 1970. 1.3 billion today and we’re projected to go to 2 billion by 2035. https://en.m.wikipedia.org/wiki/Motor_vehicle#Ownership_tren...

Population has approximately doubled while simultaneously huge swaths of the globe have gone from "only the rich can afford cars" to "the middle class can afford cars."

While the CO2 certainly isn't good one would need to do some Olympic level mental gymnastics to argue that an increase in wealth to the point where billions more people can afford an expensive complex good like a car is a bad thing overall.

Re: Inflation Truthers

#19

Post by darrenf »

dahfizz wrote: post #13
allendoerfer wrote: post #7

One gotcha about how inflation is calculated (at least in Germany, I assume it to be the same in the US), is that they try to compare identical products. So if this years cars do not have air conditioning, but next years cars do, the prices can increase accordingly without showing up as inflation, because you are getting "more car for more money". The problem appears at the point, when there are no cars without air c…

This is a fundamental problem with inflation calculation. How much would an iPhone be worth in the 1800's? How much would the Federal government have paid for a gigabit internet connection 100 years ago? Considering they spent tens of millions of dollars developing the Arpanet, I would say that the cost of internet has fallen dramatically. Inflation calculations are only meaningful over short time periods. When chain…

AIUI, economists measure inflation by comparing prices of a "basket of goods" – the contents of which change over time, specifically to reflect changes in consumer habits, technological progress, and other non-monetary factors. If we can trust or agree that the basket is updated frequently enough with sufficient accuracy at a broad scope, then inflation should indeed be comparable over decades.

Here's how the UK defines its basket of goods, and the rules for changing it: https://www.ons.gov.uk/economy/inflationandpriceindices/arti...

Re: Inflation Truthers

#20

Post by throw0101a »

iguy wrote: post #9

It's a bit confusing what he's arguing against. But his 2nd-last graph is the good one, [1]. That's only 20 years but [2] is the same thing since 1950. Some things have become much cheaper, other things have become more expensive. Attempting to summarize that in one number seems like it hides more than it exposes, no matter what number you pick. [1] https://awealthofcommonsense.com/wp-content/uploads/2021/01/... [2]…

Probably some key paragraphs:

> Unfortunately, the pandemic has permanently broken every economic chart in existence.

> But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year.

> If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years.

> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[fn2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.

> This is absurd and patently false but that’s the claim you’re making if you really think inflation is this high.

[fn2] then points to a tweet:

* https://twitter.com/tanayj/status/1345080274107785216?s=20

Which has inflation at 10-12%, per:

* https://chapwoodindex.com/

The creator of this report is Ed Butowsky:

* https://chapwoodindex.com/contact-us/

His connection to reality seems to be tenuous in some aspects:

> In June 2018, Butowsky filed a defamation lawsuit in U.S. federal court seeking $57 million in damages from NPR and one of its reporters, David Folkenflik. Butowsky accused Folkenflik of pushing a "false narrative" of Butowsky's involvement in a now-retracted Fox News story alleging that the murder of Democratic National Committee staffer Seth Rich was connected to the 2016 leak of DNC emails to WikiLeaks. Butowsky also alleged that Folkenflik conspired with an attorney to extort money from Fox. Butowsky told Courthouse News Service that he still believes the Fox News story was accurate.[12] The case is scheduled to go to trial in mid-2021.[13]

> By August 2020, Butowsky still insisted that the retracted Fox News story was accurate.[2] He claimed without evidence that the Seth Rich family were "not innocent bystanders" and that they were "in possession of material evidence indicating that Seth Rich downloaded the DNC emails, sent them to Wikileaks, and requested payment."[2]

* https://en.wikipedia.org/wiki/Ed_Butowsky#Murder_of_Seth_Ric...

So if the GDP grew "only" ~2.5%, then any inflation above that (as the 'truthers' claim), would mean were actually in a recession/depression for the last decade... which makes no sense. If inflation is >5% (per the truthers), then the economic growth would have had to been on top of that, for a nominal growth rate of >7%.

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