71–80 of 121 posts
Real inflation is very hard to measure, because it's not only prices that change - more often the product loses quality while price stays the same. Either way, you are getting less for what you pay for, but only the price change is measured as inflation. In addition, people switch over to cheaper alternatives when products get more expensive - meat is replaced with vegetables for example. This changes the average bas…
Earlier quoted context omitted.
>The issue is the generic basket of goods isn’t relevant for all people. but the BLS puts out figures for each category? https://www.bls.gov/news.release/cpi.t02.htm
Yes, I agree it’s not as useful if you trust government sources. I’m not that familiar with USA inflation but with Canadian inflation statistics, certain categories feel way off - such as housing. As someone who is considering buying a house their measure is useless. BLS numbers are also controversial - https://www.investopedia.com/articles/07/consumerpriceindex....
Because it's based off "owners equivalent rent", not the sticker price of a house. The latter is somewhat problematic because a house is an investment, not an expenditure (unlike an apple or a doctor visit).
Real inflation is very hard to measure, because it's not only prices that change - more often the product loses quality while price stays the same. Either way, you are getting less for what you pay for, but only the price change is measured as inflation. In addition, people switch over to cheaper alternatives when products get more expensive - meat is replaced with vegetables for example. This changes the average bas…
Futures markets are a good example, steel, lumber, cattle, etc...
No thanks
Earlier quoted context omitted.
> What makes you think a NGO would do a better job? Maybe they wouldn't do better, but they wouldn't have a trillion dollar incentive and ideally there'd be competing metrics. > Are you missing a part of your argument here? You just say that a few categories make up 60% of the CPI, then immediately conclude that "it makes no sense that inflation has been flat". In the US, over the last 10 years housing, education and…
>Maybe they wouldn't do better, but they wouldn't have a trillion dollar incentive and ideally there'd be competing metrics. The fact that no private entities tried to do anything similar (eg. bloomberg, s&p, msci) despite the massive incentive to do so (it's hard to price bonds/mortgages/loans if you can't trust the inflation numbers), suggests that the current number is already pretty good and/or that coming up wit…
> That seems pretty consistent with the figures from CPI:
CPI 1970: 31.1 CPI 2021: 570.6 Increase: 570/31 = 18-fold compared to 31-fold. Don't just say "looks similar" when you could do simple division and realize it's not similar. I don't think there is a single economist that would argue that health care spending has not grown considerably faster than the rate of inflation.
Here's the continuously compounded rate of growth of health expenditures as per the st louis fed
DATE HLTHSCEXPHCSA_CCH
1/1/01 8.61255
1/1/02 8.53011
1/1/03 6.8683
1/1/04 7.1269
1/1/05 6.22677
1/1/06 6.17762
1/1/07 6.12021
1/1/08 4.61058
1/1/09 4.60561
1/1/10 3.86769
1/1/11 3.5515
1/1/12 3.53598
1/1/13 2.54628
1/1/14 5.1474
1/1/15 6.26148
1/1/16 5.01743
1/1/17 3.98121
1/1/18 4.16224
You can do the same for housing [1]
Earlier quoted context omitted.
>Maybe they wouldn't do better, but they wouldn't have a trillion dollar incentive and ideally there'd be competing metrics. The fact that no private entities tried to do anything similar (eg. bloomberg, s&p, msci) despite the massive incentive to do so (it's hard to price bonds/mortgages/loans if you can't trust the inflation numbers), suggests that the current number is already pretty good and/or that coming up wit…
The reason there's no concerted effort for Bloomberg, S&P, etc to create an alternative inflation index is because there's no point. It won't be able to be integrated into financial products. Finance is extremely regulated and apart from some bespoke CDS, getting acceptance of a main stream financial product with this weird index would be very difficult. With smart contracts there is no approval process and a very lo…
1. you're thinking that the index would have to be integrated into the product itself (eg. this bond pays s&p inflation index + 2%) for it to be useful. This isn't the case. Even for forecasting or internal rate-setting purposes it would be massively useful.
2. If you check the website for s&p or msci, they got an endless list of indexes. Some of them are even integrated into financial products (eg. tracked by ETF or derivatives). Exotic indexes is definitely not a problem for them.
>I don't think there is a single economist that would argue that health care spending has not grown considerably faster than the rate of inflation.
I think the problem here is that you're conflating per-capita spending with price increase. As mentioned earlier an aging population would increase per-capita spending without necessarily increasing price. People opting to buy better, but more expensive care would also increase per-capita spending without necessarily increasing price.
>You can do the same for housing [1]
What's your contradictory source for the actual price of housing?
Real inflation is very hard to measure, because it's not only prices that change - more often the product loses quality while price stays the same. Either way, you are getting less for what you pay for, but only the price change is measured as inflation. In addition, people switch over to cheaper alternatives when products get more expensive - meat is replaced with vegetables for example. This changes the average bas…
Meanwhile digital content and communication services have become free and ubiquitous. Free goods don't get priced at all. This means some categories may have lower than headline inflation. Can you imagine what a pre-internet era company would have been able to charge for an Amazon Echo style device that played any song you asked it to, controlled your home and estimated your drive time? Amazon practically gives them away for free. You don't even have to pay for Prime.
Moreover, the healthcare plan that many people's employers buy on their behalf has accounted for a growing portion of overall compensation. Healthcare in US is so distorted that it barely has a measurable signal for price/service, and yet in the US it consumes 1/6 of GDP. Since many people's employers pay for this, it doesn't factor into the consumer price index.
College tuition? It's up 2-5X in the past 20 years. Fine, we can measure the cost of tuition increases, but does it take into account the interest payments on the student loan debt that, for some, exceed the original loan by a factor of 5-10X? (I don't actually know).
This is just to agree that measuring inflation is really tricky, especially in an age of accelerating technological advancement and institutional failure.
Real inflation is very hard to measure, because it's not only prices that change - more often the product loses quality while price stays the same. Either way, you are getting less for what you pay for, but only the price change is measured as inflation. In addition, people switch over to cheaper alternatives when products get more expensive - meat is replaced with vegetables for example. This changes the average bas…