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

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

#91

Post by throw0101c »

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.

> 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.

You do know that the CPI (and CPE) are made up of components, right? Like Shelter, Energy, Transportation… Food.

Food can go up more that 3.5% while other items (like Transportation/Energy/Oil) go down, so on average the prices you see have gone up by 3.5%. The individual components may be more (or less) than the 3.5% average.

Further, the CPI is an average basket of goods and services (taken from spending surveys done by many people), which may or may not correspond to what you personally put in your own basket. In Canada, StatCan has a Personal Inflation Calculator where you can enter budget as see your personal inflation rate which may be different than the headline inflation rate:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020cal...

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...

Further, the number you see in headlines is a national average which may be different to what has happened to your local prices.

TL; DR: model of reality ≠ reality.

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

#92

Post by throw0101c »

cruffle_duffle wrote: post #45
arduanika wrote: post #17

Earlier quoted context omitted.

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.

> The pandemic didn’t cause this inflation.

Have you tried buying a car, new or used, recently? Supply chain issues caused by the pandemic certainly caused (parts of) inflation. Then there's geopolitics (energy/oil, food/wheat), also not helping with inflation.

Supply-driven inflation looks to be the cause of at least half the run-up:

* https://www.frbsf.org/research-and-insights/publications/eco...

* https://www.frbsf.org/research-and-insights/data-and-indicat...

* https://en.wikipedia.org/wiki/Cost-push_inflation

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

#93

Post by randomdata »

mistermann wrote: post #58
randomdata wrote: post #41

Earlier quoted context omitted.

> 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…

> With inflation, we want to know about the change in value of the dollar only. By "we", you are referring to you and others who want to know only this. Some people (not many) want to know what is going on comprehensively, and in fact . For example: I would like to know if there is any strategic changing of formulas to improve appearances going on, like there has been at pretty much every single job I have ever worke…

> By "we", you are referring to you and others who want to know only this.

Right. I am referring to all those who want to know only this, along with everyone else. Because those who want to know something else would use another measure. Those complaining that inflation doesn't give you some other economic indicator is like someone complaining that temperature is not a good measure of distance. Well... duh.

> Some people (not many) want to know what is going on comprehensively

Absolutely. Which is why we have many different ways to look at inflation. In fact, don't White House economists use 30-some-odd different measures of inflation throughout the course of their work?

But eventually you are going to want to put it to practical use, mathematically, and our formulas require a single number. CPI is the one we picked to standardize on (but, of course, you can choose another if you want). It won't be 100% accurate – determining that is fundamentally impossible and you know that going into it – but it will be good enough.

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

#94

Post by hackable_sand »

olliej wrote: post #44

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…

This might help. Idk enough about the topic to really interpret this in a helpful way.

"When people talk about inflation, they usually refer to ordinary goods and services, which is tracked by the Consumer Price Index (CPI). This index excludes most financial assets and capital assets. Inflation of such assets should not be confused with inflation of consumer goods and services, as prices in the two categories are usually disconnected. The prices of some goods and services such as housing, energy, and food do track closely with some financial assets."

https://en.m.wikipedia.org/wiki/Asset_price_inflation#:~:tex...

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

#95

Post by tonymet »

woodruffw wrote: post #39
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: anot…

the average lifespan in the middle ages was 35 too. does that mean there were no old people?

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

#96

Post by abeppu »

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…

> True inflation would measure the amount of prosperity achieved per hour worked.

I think this isn't a measure of inflation per se, because productivity changes are big over the decades. But I do think looking at costs in terms of hours of work is really helpful.

I think back to an event in some HS extracurricular when a group of students got to ask questions of a gubernatorial candidate, and one kid asked if he was going to do anything to make college more affordable at state schools, and this candidate (perhaps keenly aware that almost none of the students could vote) basically laughed it off and talked about working at restaurants to put himself through school (I think in the 70s). How many hours of (unskilled?) labor was a semester of tuition then, versus 30 years later? How many hours was a tankful of gas, or rent for half an apartment, or a heating bill? How feasible is it really to work one's way through even a public school?

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

#97

Post by tonymet »

ProfessorLayton wrote: post #38
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 restricti…

95% of zips in 1963 were safe and livable. Now everyone is competing to live in 15% of zipcodes

You address the supply side of the "housing crisis", what about demand?

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

#98

Post by IshKebab »

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?

It isn't exactly. Increasing interest can mean you have to pay liabilities unexpectedly early. But it's really the difference between your income and interest that matters. If your income is keeping up with inflation then higher inflation doesn't make you worse off; it just means you are paying off debts faster.

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

#99

Post by tonymet »

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…

Like peter theil says, in 40 years only technology has improved , the real world has declined.

Should we value technology so much that we cheer on the loss of the real world?

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

#100

Post by decremental »

nytesky wrote: post #70
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…

The “one income household” model of the 50s worked for two reasons. 1) the rest of the world was in ruins, so for 50s-60s US was sole industrial power more or less. 2) artificial labor “scarcity” where POC and women were banned from many occupations. The remaining available labor (ie white men) had more leverage.

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