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Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

forbes.com

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Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#31

Post by DarkmSparks »

willcipriano wrote: post #27
DarkmSparks wrote: post #25

Inflation expectations are one of the key elements that determine next years inflation. The main reason they have always "fiddled" the public inflation numbers is if they reported actual inflation people would set their expectations on that - and it would make next years inflation worse/more volatile. insiders generally dont care about the public figures - they have their own in house statisticians to give them the r…

> they have their own in house statisticians to give them the real picture. I wonder if that is behind some price increases blamed on inflation that are larger than inflation. They mean inflation not CPI.

exactly.

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#33

Post by adriand »

tonymet wrote: post #16

I recommend people use many different indicators to get a mental model of inflation, and you will notice that CPI does not represent inflation well. The memes of Arby’s 5 for $5 becoming 4 for $10 are more informative than the CPI numbers. Don’t let the shock at the grocery store wear off – it’s real and painful despite what the news tells you. True inflation would measure the amount of prosperity achieved per hour w…

But it’s not like our standard of living has remained static while we need to work more. A lot has changed. In 1960 the average single family home was 1300 square feet, now it’s more than double that, and it’s packed with amazing amenities and entertainment options. What would an iPad cost in 1960?

Obviously the question is kind of nonsensical and yet on the other hand, if you were to try and quantify the price of our ability to work from home, for instance, we have a way better deal going than they did in 1960. You could retort that this is the inevitable march of technological progress, but could it be the result of hard work and innovation including the hard work and innovation of women in the work force?

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#34

Post by jeffbee »

slibhb wrote: post #4

It's interesting that consumer sentiment apparently tracks the older formula more closely. Presumably we have data that could allow us to include "the price of money" in inflation metrics, perhaps weighed based on how much the average American borrows.

Headline consumer sentiment is polluted by junk like this article. People report their personal household situation is fine and they expect it to continue being at least this good or better in 1 and 5 years. But they've heard so much shadowstats horseshit on the radio that they are compelled to stake out a negative view on the economy as a whole.

In the latest UMich consumer survey majority of respondents expect their incomes to grow faster than prices, in fact the reported probability of real personal income rising has never been higher in the history of the survey. And, with respect to inflation, consumers expect incomes to rise about 2.5% per year, and that expectation is higher than the expected increase in prices. During times of very high inflation respondents reported expectations of 6% nominal income increases. So this is all consistent with the idea that inflation as people actually experience it has been moderate. But, further down the February results, you can see that record numbers of people report hearing negative news stories about prices, way way way higher than in 1980! Which is totally crazy if you were here in 1980! You can also read further and see that expectation of rising unemployment have been consistently high for the last 5 years, and reports of having heard news stories about unemployment have been at record highs, while responses about the probability of losing their own job are at record lows and of course objective unemployment is almost dangerously low.

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#35

Post by jeffbee »

ein0p wrote: post #32

That seems subjectively accurate, looking at my grocery store receipts and $13/lb meat. Certainly more accurate than “3.5%” bullshit the “free press” is asking us to believe.

If you have fancy meat tastes, that's on you. https://www.ers.usda.gov/webdocs/DataFiles/52160/cuts.xls?v=...

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#36

Post by ein0p »

jeffbee wrote: post #35
ein0p wrote: post #32

That seems subjectively accurate, looking at my grocery store receipts and $13/lb meat. Certainly more accurate than “3.5%” bullshit the “free press” is asking us to believe.

If you have fancy meat tastes, that's on you. https://www.ers.usda.gov/webdocs/DataFiles/52160/cuts.xls?v=...

Those aren’t fancy cuts or prime grade beef. Just regular steak at Kroger or Costco. Go see for yourself if you’re in the US. It really feels like the bottom is about to fall out from US economy. I don’t know how the low income families deal with a 30% increase in their grocery bills which were a significant chunk of their spending even a few years ago. Nor how they pay rent which has also increased massively.

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#37

Post by caesil »

I don't really understand the argument at the heart of this article, which is "we should include interest rates in CPI".

How do interest rates effect everyday people exactly, other than price inflation on goods and services (which is included separately in CPI)?

The only way seems to be interest rates on personal loans and mortgages. So if anything, we should only include interest rates in proportion to how many people are taking out major loans during the sampled period (and maybe some additional amount based on the effect on adjustable-rate mortgages, etc).

Blindly stacking interest rates on top of CPI doesn't really make sense as a measure of personal inflation, and "it feels like stuff got more expensive" (as a lot of other comments here argue) isn't so much an argument for this strategy so much as an argument that the CPI 'basket of goods' needs to be rebalanced in other ways.

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#38

Post by ProfessorLayton »

tonymet wrote: post #16

I recommend people use many different indicators to get a mental model of inflation, and you will notice that CPI does not represent inflation well. The memes of Arby’s 5 for $5 becoming 4 for $10 are more informative than the CPI numbers. Don’t let the shock at the grocery store wear off – it’s real and painful despite what the news tells you. True inflation would measure the amount of prosperity achieved per hour w…

There are 153 million more people in the U.S. today than in 1963.

The reason these neighborhoods are exclusive to the wealthy is that housing there is scarce despite growing demand due to job growth. Housing in places like the Bay Area is such a big portion of monthly expenses that stuff like Arby's 4 for $10 or whatever isn't whats hurting people the most.

Lots of these issues just come down to housing and restrictive zoning.

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#39

Post by woodruffw »

tonymet wrote: post #16

I recommend people use many different indicators to get a mental model of inflation, and you will notice that CPI does not represent inflation well. The memes of Arby’s 5 for $5 becoming 4 for $10 are more informative than the CPI numbers. Don’t let the shock at the grocery store wear off – it’s real and painful despite what the news tells you. True inflation would measure the amount of prosperity achieved per hour w…

> Remember in 1963 only the man was working, and typically supported 4 kids, a wife and often parents in the home.

This is a ridiculous exaggeration: the average US household was 3.7 people in the 1960s, not over 6[1].

There are good reasons to hold politicians to task for recent abnormally high inflation. But this comment is more of an atavistic fever dream of the past than an expression of those reasons.

Edit: another source puts it at 3.3[2].

[1]: https://www.statista.com/statistics/183657/average-size-of-a...

[2]: https://www.statista.com/statistics/183648/average-size-of-h...

Re: Summers: Inflation Reached 18% in 2022 Using the Government's Previous Formula

#40

Post by tossandthrow »

adriand wrote: post #33
tonymet wrote: post #16

I recommend people use many different indicators to get a mental model of inflation, and you will notice that CPI does not represent inflation well. The memes of Arby’s 5 for $5 becoming 4 for $10 are more informative than the CPI numbers. Don’t let the shock at the grocery store wear off – it’s real and painful despite what the news tells you. True inflation would measure the amount of prosperity achieved per hour w…

But it’s not like our standard of living has remained static while we need to work more. A lot has changed. In 1960 the average single family home was 1300 square feet, now it’s more than double that, and it’s packed with amazing amenities and entertainment options. What would an iPad cost in 1960? Obviously the question is kind of nonsensical and yet on the other hand, if you were to try and quantify the price of ou…

The main thing is, that I could actually support a household of 6 people on a single income if I was allowed to fix the comfort at the 60s level.

1. No flying on vacation and only simple camping as vacation 2. No technology: Computers, phone, television. Nothing, and no associated costs with subscriptions, etc. 3. Eat like it was the 60s, mainly potatoes (I am from Northern Europe).

That said: I truly believe in the parent commenters key idea. We need to create more real prosperity for people. But in order to do that, we need to adjust the activities – Marketing and expensive dead-end projects (read: projects that occupy a lot of person-hours) does not achieve real prosperity.

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