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Food Prices Are Soaring Faster Than Inflation and Incomes

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Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#411

Post by 908B64B197 »

whoisninja wrote: post #237

CPI is a joke, they do something called hedonic adjustments to things like tech products etc. It's completely subjective and BS. Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high. CPI is absurd, it only perpetuates consumerism and punishes savers. We product 2x the food society consumes - mostly wasted away, just with some supply chain efficie…

> We product 2x the food society consumes - mostly wasted away, just with some supply chain efficiency

At some point if the prices rise enough it should become profitable to streamline the supply chain?

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#412

Post by Cederfjard »

savanaly wrote: post #377
pwm wrote: post #363

Earlier quoted context omitted.

I'm not an economist. My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years…

Good X and Good Y both increase in price over some period of time, but one does by 2% and the other by 4%. What is the true value of inflation? 2% or 4%? Or is it 3%? Or is it 3.5% because you buy one of the goods twice as often as the other? That's a question of first philosophical origins, and there's no "right" answer. Particularly if one of those is a house and in the period of time mentioned houses not only got…

I guess that still leaves the question that since it is so difficult, is the CPI actually useful?

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#413

Post by 908B64B197 »

Robotbeat wrote: post #396

Cars are much safer and (for the same given size) go a lot farther for the same amount of fuel. They’re also faster, more reliable, last longer between maintenance (used to be 3000 miles between oil changes, now it’s... 7500 miles or so), more comfortable, and with more useful features (navigation, phone integration, etc). As far as homes, there HAS been real estate inflation, but homes are now better insulated, have…

> As far as homes, there HAS been real estate inflation, but homes are now better insulated, have much more efficient heating and cooling (and now have actual cooling whereas in the past were often uncooled), have more bathrooms, and have much more efficient and cheaper lighting (which doesn’t need to be replaced as often and has lower fire risk).

That all matters less than the location of the house.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#414

Post by [deleted] »

savanaly wrote: post #377
pwm wrote: post #363

Earlier quoted context omitted.

I'm not an economist. My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years…

Good X and Good Y both increase in price over some period of time, but one does by 2% and the other by 4%. What is the true value of inflation? 2% or 4%? Or is it 3%? Or is it 3.5% because you buy one of the goods twice as often as the other? That's a question of first philosophical origins, and there's no "right" answer. Particularly if one of those is a house and in the period of time mentioned houses not only got…

[deleted]

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#415

Post by bcrosby95 »

savanaly wrote: post #377
pwm wrote: post #363

Earlier quoted context omitted.

I'm not an economist. My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years…

Good X and Good Y both increase in price over some period of time, but one does by 2% and the other by 4%. What is the true value of inflation? 2% or 4%? Or is it 3%? Or is it 3.5% because you buy one of the goods twice as often as the other? That's a question of first philosophical origins, and there's no "right" answer. Particularly if one of those is a house and in the period of time mentioned houses not only got…

The problem is laymen care about cost of living, not CPI. But news agencies commonly talk about inflation with CPI rather than an actual cost of living. Which is what matters to people living ordinary lives.

Given this, the answers to your questions should be obvious. The answer, as far as laymen are concerned, is 3.5%. Improvements don't matter either. If we eliminated every car other than a Porsche, as far as laymen are concerned then car inflation went up by around 150%.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#416

Post by curryst »

pwm wrote: post #363
em500 wrote: post #336

Earlier quoted context omitted.

There's a ridiculous amount of misconception, FUD, and ignorance around inflation / CPI (it doesn't include housing, it overweights entertainent, it exclude food and energy, hedonic adjustments/basket substitutions make everything look artificially cheap) To professional economists, it can be infuriating to read (I imagine similar as medical professionals reading antivax blogs/comments, or radio engineers reading abo…

I'm not an economist. My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years…

Not an economist either, but I think I can explain that one. CPI is a single rate derived from the change of price in a bunch of goods (houses aren't actually included, as another person noted). A change in CPI tells you nothing about the change in price of a particular good in it; it only tells you how much more expensive those goods are if you bought all of them.

Just as an example, let's say milk and eggs are the only thing on the CPI, and they're both at $2. If milk goes up to $3 and eggs go down to $1, the CPI says there was 0% inflation (assuming they don't adjust for quantity consumed). So rent can go up a lot without affecting the CPI too much, as long as the cost of other goods goes down enough to offset that increase.

Here's a graph showing inflation of different goods between 1998 and 2018: https://realinvestmentadvice.com/wp-content/uploads/2019/04/... As you can see, a lot of "mandatory" things inflated a lot, but the increase in those costs is offset by the decrease in electronics prices.

The CPI is meant, afaik, to gauge the increase in the cost of living for the "average person". It's useful for driving fiscal policy, but it's not terribly useful to laymen, imo (and that includes myself).

Houses are included in asset inflation, I believe. Here's a chart showing asset inflation: https://realinvestmentadvice.com/wp-content/uploads/2019/04/...

Real wages are more interesting to laymen, I think. Those are effectively wages adjusted over time based on inflation from CPI. Using your housing example again, it doesn't really matter if a house cost $200k 20 years ago and costs $400k now, as long as wages doubled over the same period, all things equal. Inflation is fine (for the purposes of buying a house) as long as wages rise to match that increase.

The reason many people can't buy houses anymore is that real wages have fallen. https://en.wikipedia.org/wiki/Real_wages Wikipedia has some interesting info on that. In an ideal world, inflation decreases the purchasing power of a dollar, but your employer gives you more of them to compensate for that. That never happened for many people.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#418

Post by lotsofpulp »

fennecfoxen wrote: post #291
whoisninja wrote: post #237

CPI is a joke, they do something called hedonic adjustments to things like tech products etc. It's completely subjective and BS. Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high. CPI is absurd, it only perpetuates consumerism and punishes savers. We product 2x the food society consumes - mostly wasted away, just with some supply chain efficie…

> CPI is absurd, it only perpetuates consumerism and punishes savers. Okay okay back up. The consumer price index is a series of numbers designed to help people understand what dollar-denominated figures mean to ordinary people going about their lives, spending those dollars. If that's "consumerism," well yes, it's a portrait of consumerism. Many economists, mind you, believe CPI doesn't correct quite enough, and sus…

>The consumer price index is a series of numbers designed to help people understand what dollar-denominated figures mean to ordinary people going about their lives, spending those dollars.

It's done an absolutely terrible job for the past 15 years, for my lifestyle and where I live. I suspect it hasn't reflect many other people's budgets either, hence the common argument of official CPI figures being nonsense.

I don't even have to look at anything other than the changing health insurance premiums/deductibles/co pays/out of pocket maximums to prove it, not to mention real estate, childcare, taxes, and education. It eviscerates any downward effect tech products and grocery prices might have.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#419

Post by thehappypm »

gher-shyu3i wrote: post #224
lottin wrote: post #217

Earlier quoted context omitted.

People don't save money. They save consumption, and the savings are in the form of money or other assets.

If I have $10 from 10 years ago, they're worth less today. The government's incompetence and engagement in usury has caused my money to lose value.

Why do you feel that a dollar bill needs to buy exactly the same amount of real-world stuff in a decade's time? Cash is not an investment, so why do you expect it to be one?

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#420

Post by xyzzyz »

rory wrote: post #385
pwm wrote: post #363

Earlier quoted context omitted.

I'm not an economist. My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years…

Not the parent, but the answer here comes down to two simple things: 1. Home prices are not captured in CPI, only rents. 2. The headline CPI is a national number. Home price inflation has actually been somewhat tame overall in recent history (2-3% per year), but it has been very geographically uneven. Some places have experienced basically no inflation, while others have tons of it. Here is the graph for home price i…

> Home prices are not captured in CPI, only rents.

Yes, because CPI measures cost of buying service of housing. Usually, if housing prices rise, so do rents, pretty much in accord, so monitoring rents already gives you a good view on housing affordability. The extent to which cost of renting is decoupled from house prices is largely explained by changes in interest rates: lower interest rates make mortgages more affordable, which allows more bidding for houses and pushes prices up. However, this on net doesn’t do much to actual affordability of said house: at low rates, the sticker price on a house might be high, but the mortgage payments will still be low. Conversely, in the 70s and 80s, boomers saw many cheap houses on the market, but at mortgage rates of 10-12+%, these were even less affordable than houses are today.

That’s why CPI only includes rents, to make an apples-to-apples comparison.

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