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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

#151

Post by listenallyall »

woodruffw wrote: post #115
abeppu wrote: post #96

Earlier quoted context omitted.

> 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…

I agree with the point about the cost of education. In real terms, however, the cost of a tank of gas is about what it was in the 1960s[1]. Today's average is $3.63[2], which is about $0.34 in 1960 dollars. [1]: https://www.creditdonkey.com/gas-price-history.html

I never understand the "in X dollars" argument, especially when looking back longer than about a decade. The CPI only considers a certain basket of goods, it's not representative of a cost of living (that's what this thread is about), various things change price at radically different rates.

How much was an iPhone or Xbox in 1960 dollars? What was the typical cable TV bill? What did a typical American pay for a California roll or a burrito in 1960? Alternatively, given your 10x price boost, why isnt the cost of a television set or vacuum cleaner in the multiple thousands?

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

#152

Post by tonymet »

maxerickson wrote: post #126
tonymet wrote: post #106

Earlier quoted context omitted.

Pick whatever word you like if "inflation" is reserved for economists because regular people are "just too dumb to understand". We need a concept for debasement / hidden tax that allows people to hold their policymakers accountable. My point is that CPI isn't it, it underestimates true inflation by 3-5x or more , and it interferes with good governance. If the govt wants money from the people, they need to tax them an…

5x? And you think the US in general has gotten more dangerous?

what's your opinion?

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

#153

Post by JumpCrisscross »

ethbr1 wrote: post #84
PKop wrote: post #64

Earlier quoted context omitted.

"inflation rate" is a nebulous thing. Interest expense and interest rates, concretely paid by people like any other expense is not any more nebulous than tracking other expenditures. We already know the interest rate and various categories of interest expense paid by population. It is just not included. Your rationale sounds very much like "we shouldn't include it because the inflation rate would be higher". There is…

> Your rationale sounds very much like "we shouldn't include it because the inflation rate would be higher". What is the CPI actually used for? To set various levers at the central bank level to manage inflation and keep the economy humming along. One of those levers is... the Fed funds rate... which in turn influences most other interest rates. So you'd be incorporating interest into the measurement used to set inte…

> What is the CPI actually used for?

Technically, they pay closer attention to PCE.

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

#154

Post by chiefalchemist »

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…

> There are good reasons to hold politicians to task for recent abnormally high inflation.

Well, maybe 25% for the budget deficits. The Fed is responsible for 75%. They keep over-goosing the economy. They keep saturating the money supply. That devaluing is what inflation reflects. That is your money is worth less (and appears like prices going up).

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

#155

Post by JumpCrisscross »

randomdata wrote: post #113
tonymet wrote: post #106

Earlier quoted context omitted.

Pick whatever word you like if "inflation" is reserved for economists because regular people are "just too dumb to understand". We need a concept for debasement / hidden tax that allows people to hold their policymakers accountable. My point is that CPI isn't it, it underestimates true inflation by 3-5x or more , and it interferes with good governance. If the govt wants money from the people, they need to tax them an…

> Pick whatever word you like if "inflation" is reserved for economists because regular people are "just too dumb to understand". Regular people understand inflation just fine. How useful it is to them is debatable, but it doesn't have to be for everyone. It's okay if some measurements are only useful to scientists and economists. The measure of the speed of light doesn't mean much in my day to day life either, but w…

> what most people are looking for is simply cost of living measure

You may have cracked the conundrum right there. People use inflation as a gauge of COL. That is incorrect, but understandable given the lack of a well-publicised national COL metric.

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

#157

Post by bugbuddy »

4death4 wrote: post #142
woodruffw wrote: post #39

Earlier quoted context omitted.

> 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 household also includes empty nesters and people who have moved out yet haven't started a family yet. The average number of children per family in the 60s was 2.3, which means quite a few families had 3 or 4 children.

According to our experience of the last 7 years, we should expect interest rate cuts, tax cuts, and more fiscal expansion either at the same time or in some sequence. Each of them will help solve our problem. There is no fiscal conservative left in America.

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

#158

Post by Phiwise_ »

bryanlarsen wrote: post #131
Phiwise_ wrote: post #120

Earlier quoted context omitted.

>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! If you had taken a moment to consider the data presented in the article instead of dismissing it out of hand because it offends your sensibilities, you would realize it states that it obviously implies it…

> because it shows inflation is worse nowadays than in the 1980s. Obviously you didn't live through the 1980's, because that is obviously false to anybody who has.

>If these facts are so right, why do they sound false to me?

Again, this appeal to the vibe you're getting right now is not compelling to anyone who actually cares about economics.

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

#159

Post by Phiwise_ »

throw0101c wrote: post #127
ein0p wrote: post #125

Earlier quoted context omitted.

CPI is designed to make the government look good, hence the article.

> CPI is designed to make the government look good, hence the article. The CPI is run by the Bureau of Labor Statistics: > The "food price index" evolved into what we now call the Consumer Price Index (CPI). During World War I, rapid in­creases in prices, particularly in shipbuilding centers, made a more comprehensive index essential for calculating cost-of-living adjust­ments in wages. Studies of family expenditures…

>> CPI is designed to make the government look good, hence the article. >The CPI is run by the Bureau of Labor Statistics: ... https://www.bls.gov/opub/hom/cpi/history.htm

You do notice that your link to back up disagreeing with the assertion of potential government bias is to a .gov domain, surely?

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

#160

Post by mint2 »

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’s a number huge flaws in all that logic.

Comparing Palo Alto circa 1960 to Palo Alto circa 2020 is frankly bizarre. But if we’re using that logic why stop at 1960? Coulda had that land for almost nothing in 1700, so there was infinite inflation from 1700 to 1960! Gasp!

But what’s the result if we look at the price of a compute that a 1960 worker could buy vs a 2020 person? Let’s see a modern household has the equivalent to a very large number of 1960 mainframe computers, looks like their buying power has gone up infinitely!

Or lots in prime La neighborhoods, super affordable in 1860! That means people have lost so much purchasing power because they’re hard to afford now!

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