71–80 of 195 posts
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Is the inflation rate transitory or is the price level fluctuation transitory? Makes a big difference...
The inflation rate is transitory. Price levels won't come back down unless we get transitory deflation of equal (or greater) magnitude.
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Both can be correct, and likely are. HN doesn't live in "America" - we live in a bunch of different cities with different economies. This is actually a key problem with the Fed's tools -- they're national in scale. Inflation can be low in Acron, OH, but very high in San Francisco.
What a surprise that this comment thread is full of software developers in HCOL areas anecdotally seeing prices rise faster than the national average!
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Cars are included in the CPI. Don't spread FUD. https://www.bls.gov/cpi/factsheets/new-vehicles.htm
https://www.epsilontheory.com/im-trying-to-understand-hedoni... "A Honda Accord cost $12,000 in 1990 and it costs $25,000 now. A Mustang was $9,000 and now it’s $27,000. The BLS has new car prices close to unchanged over the past 30 years." Whatever you think of the validity of "hedonic adjustments", this is certainly not what I would expect when BLS reports car prices as unchanged during that period.
The Guidelines for Quality Adjustment of New Vehicle Prices are at https://www.bls.gov/cpi/quality-adjustment/new-vehicles.pdf.
New Vehicle CPI has increased 22% since 1990 (https://data.bls.gov/pdq/SurveyOutputServlet).
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Well the prices I see around me are up a lot more than 2.6%. My latest sticker shock was at Lowe's.- https://imgur.com/a/9UoXNdk
For anyone else wondering, like I was, this is a photo of copper wiring. I'm guessing thick gauge (6AWG) for dealing with high amperage. Not sure what the /3 signifies.
There are alternative (non governmental) calculations that put the increase much higher (if the 1990 calculation method was still used). http://www.shadowstats.com/alternate_data
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The Honda Accord of 1990 is a different class of vehicle than the Honda Accord of 2021. In 2021, there are other entry level vehicles that can be purchased for much less than an Accord.
Indeed. A 2021 Accord is far superior to a 1990 Rolls Royce or other ultraluxury car in terms of amenities, engine power, quietness, build quality, etc. That’s not even mentioning the leaps and bounds in efficiency and safety. I’d argue cars have gotten effectively cheaper over the years, as they’ve dramatically improved in every respect. If you could still buy a 1990 Accord manufactured today, it would probably sell…
Is it really inflation or higher prices due to higher than normal demand? When the demand goes up the market clearing prices naturally increase (until more efficient suppliers join the game)
Is it really inflation or higher prices due to higher than normal demand? When the demand goes up the market clearing prices naturally increase (until more efficient suppliers join the game)
A shift of both demand and supply, resulting in increased prices, is one way inflation can happen.
What is important in CPI inflation are the prices consumers pay.
How that fits into bigger picture money supply * money velocity is a different conversation
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Cars are included in the CPI. Don't spread FUD. https://www.bls.gov/cpi/factsheets/new-vehicles.htm
https://www.epsilontheory.com/im-trying-to-understand-hedoni... "A Honda Accord cost $12,000 in 1990 and it costs $25,000 now. A Mustang was $9,000 and now it’s $27,000. The BLS has new car prices close to unchanged over the past 30 years." Whatever you think of the validity of "hedonic adjustments", this is certainly not what I would expect when BLS reports car prices as unchanged during that period.
High car and house prices are what you get when you have unprecedented close-to-zero interest rates for this long.
Prices = f(interest rates, affordability)