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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

#191

Post by sanp »

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…

Perhaps a Cost of Thriving Index? https://manhattan.institute/article/the-cost-of-thriving-ind...

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

#192

Post by kalkin »

Interesting that the article doesn't mention what seems to be an obvious takeaway if you believe that interest rates explain the gap between CPI and sentiment: raising interest rates to fight inflation will make people feel inflation is worse.

I'm suspicious that this isn't mentioned because Summers and Roy are inflation hawks who've advocated the Fed raise rates and the alleged fact that people will experience this as increased inflation at least in the short term is politically inconvenient for them, even as they'd like to claim inflation is worse than the CPI says so they can claim vindication for their hawkishness...

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

#193

Post by sanp »

voisin wrote: post #178
bugbuddy wrote: post #157

Earlier quoted context omitted.

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.

> There is no fiscal conservative left in America. Truer words have never been spoken. Fiscal conservatism died with Reagan.

Yes, Reagan the fiscal conservative who tripled the deficit and national debt:

https://www.pbs.org/wgbh/commandingheights/shared/minitext/e...

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

#194

Post by brandonmenc »

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.

Yeah, and unless they were like, a doctor or a lawyer, they were living in borderline poverty.

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

#195

Post by jmyeet »

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…

I agree with this: inflation as an economic measure is an intentional policy tool to transfer wealth from the poor to the wealthy.

In the last few months we've seen headlines about inflation "levelling off" but that just means prices aren't growing as fast. The 20-30% increases in housing in particular aren't going down. In fact, it's intentional government policy to make sure house prices and rents never go down.

You mention Silicon Valley and others dismiss this as a result of the dot com bubble but it's really not. It's zoning policy. IIRC the smallest lot in Menlo Park or Mountain View is ~10,000 square feet.

But you see it elsewhere. The average house price in London is ~706k GBP. 30 years ago it was ~70k.

Inflation is used to justify wage suppression. Whatever the formula, it doesn't accurately reflect to cost-of-living crisis we're in.

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

#196

Post by eru »

woodruffw wrote: post #138
kcplate wrote: post #134

Earlier quoted context omitted.

Ok putting the fever dream aside, even at 3.7 people per household the 1963 to 2024 numbers as it relates to income vs cost of living is pretty eye opening. You are not really disproving the general point by getting fussy over the numbers.

The current average US household has 3.1 members. There’s an important discussion to be had about cost of living and stagnant wages despite productivity, but as I said in another comment: that conversation needs to be factually grounded. Vague reactionary handwringing about the good old days isn’t going to cut it, especially when the good old days weren’t all that great by contemporary standards (or for contemporary…

What stagnant wages? The labour share of GDP has held roughly constant over the decades.

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

#197

Post by shrubble »

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…

You can listen to Bing Crosby's Christmas album, to the song "It's Beginning to Look a Lot Like Christmas", where the parents having 4 children (household size thus 6) is described, as an anecdotal supporting note... since it was a popular song for the masses, 4 kids was not seen as unusual.

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

#198

Post by lowkey »

tonymet wrote: post #104
nytesky wrote: post #70

Earlier quoted context omitted.

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.

Is the argument that true inflation should be worse than CPI because it helps with diversity?

From the article, the biggest discrepancy between CPI and true inflation is a result of a change in the formula made in 1987 that removed interst rates aka the cost of money from CPI. The CPI formula replaced the actual cost of financing homes and autos with a new term, owner's equivalent rent. The argument made by the underlying paper [1] is that the older calculation better reflects the cost of living increases experienced by consumers and more closely correlates with the widely used University of Michigan Index of Consumer Sentiment. Also, notable is that consumers care much more about the cumulative multi-year effect of inflation while economists only worry about year/year changes in the rate of inflation as can be seen here [2] (worth a click)

[1] https://www.bls.gov/pir/journal/gj02.pdf

[2] https://twitter.com/darioperkins/status/1770783161330323925/...

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

#199

Post by MisterBastahrd »

voisin wrote: post #178
bugbuddy wrote: post #157

Earlier quoted context omitted.

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.

> There is no fiscal conservative left in America. Truer words have never been spoken. Fiscal conservatism died with Reagan.

In what way was Reagan a fiscal conservative other than making the poor targets for pain? He destroyed half the social safety net in this country while running on a hideously bigoted platform and STILL ended up spending an insane amount of money compared to his predecessors. The only fiscal conservative of the past 50 years in the White House was Bill Clinton.

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

#200

Post by citizen_friend »

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…

No. Because the things that cost significant amounts of money aren't computers, phones, and tvs (notice that poor people have these). It's the minimum bar to be a player in society that has been raised.

1960s - could have a good career without college education and it was inexpensive - can afford a house - can often not have a car

2020s - need bachelors degree to get started, probably also need a professional degree - houses occupy - need cars (likely for all adult family members)

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