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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

#71

Post by whateveracct »

hklijlyh wrote: post #63
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…

[flagged]

Also it's not hard to find cheap food at the grocery store. Whole free-range, locally grown chicken for 99c/lb is commonplace in my neck of the woods.

It's the convenience/brand power stuff that is really spiked. Fast food falls into that.

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

#72

Post by ethbr1 »

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.

> Certainly more accurate than “3.5%” bullshit the “free press” is asking us to believe.

Okay, because the air quotes and knee jerk dismissal annoy me...

The 3.x% being published is journalists repeating the reported CPI.

They are indeed still a free press, they're just dealing with people who don't on average understand how inflation measures are built, nor care.

Which is why there are articles that attempt to educate on that, whenever it comes to popular attention https://www.npr.org/2023/10/18/1197954369/two-indicators-bur... https://www.forbes.com/advisor/investing/cpi-consumer-price-...

If you wanted to air quote something, a "viewer-respecting" "intelligent" free press would be more accurately dismissive.

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

#73

Post by tootie »

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.

The "free press" is reporting BLS data. And BLS produces a CPI number based on a formula to act as an indicator, not an absolute measure. People tend to react to things they buy frequently which also happen to be the most volatile (food and fuel) and react less to things they actually spend most of their money on (shelter and transportation). CPI is a broad indicator and will never match the lived experiences of 350M individuals. Inflation can vary widely across a lot of dimensions including geography. Absolutely all of this data is available from the BLS. They only put CPI in headlines because it is meant to convey broad national trends in a bite-sized data point.

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

#75

Post by boppo1 »

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…

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

We artificially made interest rates low (look up open market operations). Low rates make risky ventures more financially attractive by making the DCF denominator smaller. People look to invest in growth instead of reliable revenue. That is, "bet on the future" becomes dramatically more attractive than "goods and services being made now". Additionally, it devalues wages and increases the value of financial assets. It's literally "rich get richer: the policy".

Anyone who is upset about NFTs millionares existing while EMS workers and teachers struggle, or upset about billionaires' staggering wealth inequality, or fraudulent do-nothing scam businesses like WeWork and Theranos, obviously stupid ventures like Juicero, or basically any economic upside-downness that most laypeople have recently come to blame on "capitalism" need look no further than LIRP and ZIRP. We snapped all the fingers of the invisible hand, but did it far upstream of anything that average people pay attention to. Anyone who wasn't paid in equity got fucking robbed over the last 20 years.

I don't really agree that interest should be included in CPI, but I do agree that CPI (and PCE) is an absolute joke that doesn't measure what it claims to.

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

#76

Post by huytersd »

tossandthrow wrote: post #40
adriand wrote: post #33

Earlier quoted context omitted.

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…

Mainly potatoes is bullshit.

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

#77

Post by bdjsiqoocwk »

PKop wrote: post #51
bdjsiqoocwk wrote: post #49

Earlier quoted context omitted.

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

Interest expense is a real cost people pay. Why ignore it?

If in a year a burger goes from $5 to $10 and the Fed rate goes from 2% to 5%, what do you think the inflationary factor should be in your methodology?

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

#78

Post by Retric »

woodruffw wrote: post #54
tossandthrow wrote: post #40

Earlier quoted context omitted.

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…

No, you couldn't. The average working male earning 6200 USD a year in 1963 was supporting 2-3 other people (i.e., the nuclear family), not 5. This is almost directly in line, via inflation, with the average US household income and size in 2024. I agree with the larger point about prosperity, and I think there are ways in which the US (and other developed countries) have gone backwards in QoL metrics. But a serious co…

Take your typical family of 4 living on 2 incomes today.

Are they living in a 1,500sf house (median size in 1960)? Without AC, no cable TV, no computers, 1 car, no exotic / organic foods except from the garden, few toys, 60’s era medicine. Do they actually repair or even make clothes? How about home repairs?

My mother was a teen in the 60’s and while objectively they were well above the median income for the time period in many ways they lived like extremely poor people do in 2024. Some of that was actually saving money for retirement, but mostly it was just far lower expectations.

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

#79

Post by enragedcacti »

It's interesting how throughout the paper they discuss the actual borrowing cost as the driver of low sentiment but that when it comes time to explain the jump in sentiment for January despite flat borrowing costs they quickly switch to talking about the derivative of borrowing costs:

> In January, after most of the research for this paper was completed, consumer sentiment jumped to its highest level since 2021. Although this is just one month of data, it appears consistent with our hypothesis. If high borrowing costs explain the consumer sentiment anomaly of 2023, then the recent moderation of the growth rate of borrowing costs in recent months could help consumers significantly in 2024, but further rises could prolong consumer dissatisfaction.

Am I misreading this?

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

#80

Post by fragmede »

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…

What did a college education cost in 1960?

I would gladly trade WFH to be the one person supporting a family of 6. (Me, partner, two kids, two grandparents.)

The Internet's great and all (although sometimes it seems like it was a mistake), but we're so far from 1 very average person being able to support a middle class life style for 6 people.

Median income in 1960 was $5,600, which is equivalent to $60,000 today, but according to the EPI*, to provide for a family of 6, I'd need to make about $150k/yr to live in Cincinnati, Ohio (in SF it's $280k). Which isn't a lot in the FAANG world, but the point is that a very average not-very-smart person was able to provide for that many people back then.

How many very average not-very-smart unskilled people do you know make $150k/yr; how many smart people do you know that make less than that?

* https://www.epi.org/resources/budget/.

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