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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

#231

Post by linuxhansl »

Why bring this us up now? This formula was changed in 1983, when Ronald Reagan was president and the interest rate was 9.09% (down from 12.24% in 1982).

I'll note that Steve Forbes supported Trump in 2016, and claimed last year that Joe Biden is "not up to the job anymore" - although this is not necessarily relevant.

We can't change how we look at inflation based on the perception we want to achieve. This is what we have measured since 1983. And what if the change the formula back? Then we have a new number. And now what?

The article claims that the previous formula correlates better with sentiment. Maybe so. Sure, ever increasing money supply might make you feel rich, when in fact you are not. Did we think we will never have to be pay the bill for over a decade of near-zero interest rates?

The current sentiment seems to be as much influenced by what people want to believe or what their peer group on social media believes.

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

#232

Post by Dylan16807 »

wakawaka28 wrote: post #230
Dylan16807 wrote: post #171

Earlier quoted context omitted.

If you're comparing against 3-4 years ago, CPI says inflation was 18-21%. So if it's actually 25-30%, that's a significant level of error but not an enormous one. CPI says that, of those four years, almost all the inflation was in the middle two. So when it says 3.5% since last year, that's not a crazy number, it's more that it's hard to determine/remember which part of the inflation happened in exactly which month.…

>So if it's actually 25-30%, that's a significant level of error but not an enormous one. Tell that to people on Social Security... They will come up short because of these "errors".

Ha ha, very funny.

But seriously, there is a huge difference between "I think this metric is off by 3x or more" and "I think this metric is off by 1.4x"

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

#233

Post by mikelitoris »

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 extremely short summary of where all that prosperity went: up and abroad. The capitalist class hollowed out the middle income USA by siphoning solid jobs off abroad and pocketing the difference. You can thank all the neolib useful idiots for that. It is not really the result of interest rates.

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

#234

Post by GeneralMayhem »

lowkey wrote: post #201
Retric wrote: post #78

Earlier quoted context omitted.

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 per…

You make some valid points but one nitpick: what we call organic food today, they simply called food in the 60's since all food was by definition organic.

That is abjectly false. Synthetic pesticides have been used since before the second world war. Silent Spring was written in 1962 about the effects of the amounts of DDT that had already accumulated in the environment by that point.

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

#235

Post by ajkjk »

linuxhansl wrote: post #231

Why bring this us up now? This formula was changed in 1983, when Ronald Reagan was president and the interest rate was 9.09% (down from 12.24% in 1982). I'll note that Steve Forbes supported Trump in 2016, and claimed last year that Joe Biden is "not up to the job anymore" - although this is not necessarily relevant. We can't change how we look at inflation based on the perception we want to achieve. This is what we…

> Why bring this us up now?

Because it's relevant

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

#236

Post by dennis_jeeves2 »

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…

>It’s a deliberate approach to stealing your prosperity while you cheer it on.

Excellent way to put it.

To put things in perspective if one works for 5 days a week, you are paying the govt (all taxes + inflation) about 3 days of your earnings. You only get to keep what you earn for 2 days.

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

#237

Post by tsimionescu »

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…

> are there any non-tin-foil hat people that think that the numbers are actually wrong given the published methodologies?

No, but the whole point of the poster above, and of the article we're commenting on, is that the methodologies themselves are wrong (i.e. that they don't measure what people really care about, they measure something that the government thinks will look better than reality).

This is a very common problem in economics: numbers agree very well with the models, but the models themselves are barely applicable to reality.

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

#238

Post by wakawaka28 »

Dylan16807 wrote: post #232
wakawaka28 wrote: post #230

Earlier quoted context omitted.

>So if it's actually 25-30%, that's a significant level of error but not an enormous one. Tell that to people on Social Security... They will come up short because of these "errors".

Ha ha, very funny. But seriously, there is a huge difference between "I think this metric is off by 3x or more" and "I think this metric is off by 1.4x"

It's not funny dude, that is a serious problem. I have parents on Social Security and I have to pay for their budgetary shortfall. Social Security in particular is supposed to be adjusted for inflation, which is one of the reasons the numbers are deliberately wrong.

>But seriously, there is a huge difference between "I think this metric is off by 3x or more" and "I think this metric is off by 1.4x"

I think annual inflation is actually 10% right now and probably got up to 20% during the pandemic. Depending on when you look at it, that is 2-3x what the official numbers say. Prices have not gone up uniformly across categories of course, but most things are significantly more expensive than than the official numbers would predict.

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

#239

Post by mike_hearn »

kalkin wrote: post #192

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…

It does seem to say that:

As the debt increases, the federal government has to borrow more money from U.S. and foreign investors. But as would-be lenders to the U.S. see America as increasingly insolvent, investors will demand higher interest rates to lend us that money. Higher rates of government borrowing lead to higher rates for home mortgages, credit cards, student loans, car loans, and every other form of borrowing. And, as we’ve seen, these higher interest rates lead to higher price inflation, whether or not the Bureau of Labor Statistics recognizes it as such.

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

#240

Post by latency-guy2 »

bongodongobob wrote: post #219
bugbuddy wrote: post #216

Earlier quoted context omitted.

You are using a straw man. The reason we have a democracy and freedom of speech is so that each of us can voice our opinions and vote for those that share them. Unfortunately, nothing is perfect.

I'm using the term as it's used 9/10 times it comes up. I've never in my life met a self proclaimed fiscal conservative that didn't just mean "I want lower taxes". The way to lower taxes is a healthy and intelligent population. That is seen as a cost but is actually an investment that pays massive dividends. That's what a fiscal conservative would do, invest at the societal level. Otherwise they're basically just a l…

So a strawman. You set up the premise, you set up your misunderstanding, and then expect everyone else to follow your misunderstanding. You've even redefined what a "fiscal conservative" would actually do (if you were the one defining it).

Then you pulled in "libertarian" out of nowhere. Which is an obvious set up for another strawman, so lets lean into it. Whats a "libertarian"?

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