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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

#41

Post by randomdata »

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…

> In other words you had 1 man working 50 hours a week afford a house...

With inflation, we want to know about the change in value of the dollar only. We don't want to factor in the change in value of houses, food, etc. There is a place for understanding that too, but inflation is not it. Something like a cost of living index is more suitable to that kind of information.

On that note, houses are unquestionably more valuable today. For one, they are twice the size they were 60 years ago. We can all agree that a bigger house has more value than a small house, at least within reason. You can fit more in it, it is more comfortable, etc. and that is valuable. They are also a lot safer. That too is more valuable.

As such, a housing costing x% more today than as compared to some time in the past does not mean that inflation is x%. Again, we only want to know about how the dollar changed in value, not housing. Of course, if you only have numbers, it is impossible to know what share is due to housing being more valuable and what share is the dollar being less valuable, although we can say with great certainty that it is some combination of both.

CPI tries to tess out what is the dollar portion only by looking at a large basket of goods of things people buy frequently. Where you see common moment in the change in price across all items in the basket, that is assumed to be the change in value of the dollar. It's not perfect. There is no perfect metric. You are quite right that one should look at many different models, even though none of them will be perfect either. It is all good information, none of it great, but at some point you have to pick a single number.

On average, it will be close enough.

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

#42

Post by ejstronge »

ein0p wrote: post #36
jeffbee wrote: post #35

Earlier quoted context omitted.

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.

> Those aren’t fancy cuts or prime grade beef. Just regular steak... I don’t know how the low income families deal with a 30% increase in their grocery bills

I don't think low income families are buying steak - and price increases in luxury goods can understandably grow faster than in staples like non-steak beef.

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

#43

Post by woodruffw »

caesil wrote: post #37

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 peop…

The argument is bunk, and your observation is correct: inflation can be higher than the current CPI predicts, but this does not somehow imply that the CPI basket should factor instruments that do not disproportionately affect ordinary Americans' finances (or double-count ones already accounted for more directly).

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

#44

Post by olliej »

It remains absurd to me that the many ways inflation is measured and presented for the purpose of its impact on regular people is based almost entirely on its impact on funds with no meaningful component reflecting the impact on the overwhelming majority of distinct legal entities impacted by it.

My opinion is that if there are changes to monetary policy based on the effect of inflation, the policy should be centered on maximizing the outcome for the majority of distinct legal entities (ie overwhelmingly individuals) not maximizing the outcome for capital. Because wtf are you optimizing policy for the wealth generation of an overwhelming minority of the entities impacted by that policy?

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

#45

Post by cruffle_duffle »

arduanika wrote: post #17
082349872349872 wrote: post #7

I invoice in USD and have expenses in a different currency, and while I've seen a few (~5) percent decline in the exchange rate since then, it's been nowhere near 18%.

The pandemic was worldwide, and every other central bank has been printing, too. Depending on which currency you're trading against, that could be a factor. For a while in 2021-2, non-dollar currencies were inflating even faster, so DXY actually went up even as the dollar weakened against goods and services. Even if the tables have turned and the dollar is weakening faster now, it's not like everybody else has actual…

The pandemic didn’t cause this inflation. The governments response to it did. Governments love when people blame an infectious respiratory virus for their idiotic response.

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

#46

Post by PKop »

caesil wrote: post #37

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 peop…

What is confusing? The argument for including them is that people pay them.

>Blindly stacking

Stawman nonsense that literally no one suggested

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

#47

Post by cco »

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=...

Your data suggests something like 11% inflation for ground beef which was the gp's point, "not 3.5% inflation".

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

#48

Post by PKop »

082349872349872 wrote: post #7

I invoice in USD and have expenses in a different currency, and while I've seen a few (~5) percent decline in the exchange rate since then, it's been nowhere near 18%.

Exchange rate is not synonymous with inflation rate. You didn't think other countries had no inflation did you?

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

#49

Post by bdjsiqoocwk »

caesil wrote: post #37

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 peop…

Including interest rates in CPI muddles the distinction between the price of something vs how to fund the acquisition of something.

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

#50

Post by [deleted] »

ejstronge wrote: post #42
ein0p wrote: post #36

Earlier quoted context omitted.

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.

> Those aren’t fancy cuts or prime grade beef. Just regular steak... I don’t know how the low income families deal with a 30% increase in their grocery bills I don't think low income families are buying steak - and price increases in luxury goods can understandably grow faster than in staples like non-steak beef.

[deleted]
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