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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

#261

Post by seanmcdirmid »

thfuran wrote: post #246
seanmcdirmid wrote: post #227

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. They used older kids to watch younger kids, and generally let the kids fend more for themselves (my boomer dad was the oldest of 8 kids, and that was his experience, but having his grandparents die of spanish flu after WW2 hurt and helped a bit). I actually kind of admire that, and think we've lost somet…

>In a sense, FAANG salaries aren't especially high by historical standards You can't be serious. >$135k in 1980, my dad made more than that contracting in building nuclear plants That's over six times the median household income in 1980. $135k today would still be nearly twice the median household income.

It wasn't that much back then, especially when the industry was feast or famine (and it did implode in 1986 or so). But really, my only point was "a guy who had an associates degree from a CC could earn that much."

My buying power is essentially worse than my dad's, although I put in a lot more time in school for it, and supposedly made the right career choice, things just suck these days and techies are keeping their heads above water but not much more.

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

#262

Post by disgruntledphd2 »

lowkey wrote: post #198
tonymet wrote: post #104

Earlier quoted context omitted.

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 exp…

The really interesting thing about their proposed measure is that it reduces the period of extremely low interest rates post GFC. We'd be living in a very different world had this been our north star throughout that decade.

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

#263

Post by MathMonkeyMan »

MisterBastahrd wrote: post #199
voisin wrote: post #178

Earlier quoted context omitted.

> 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.

I saw an interview where Bill quipped "You know how we balanced the budget? We used a little thing called 'arithmetic'."

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

#264

Post by firstplacelast »

fragmede wrote: post #80
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…

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, bu…

I was reading murder Wikipedia the other day and one of the guys got out of prison the second time and was able to pick up a job making 1k/week in the late 70’s (49-50k/year) in SoCal.

That’s what I was making a decade ago in SoCal with a college degree (slightly more with OT).

Ohh to live the life of an uneducated violent offender in the 70’s.

https://en.m.wikipedia.org/wiki/Lawrence_Bittaker_and_Roy_No...

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

#265

Post by epicureanideal »

gumby wrote: post #164
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…

> Today Palo Alto, Menlo Park, and other super zips are exclusively [A slight exaggeration] $500k incomes and up. In the 1960 census records you will find these good neighborhoods occupied with plumbers, painters and other blue collar workers. This was unfortunately a deliberate consequence of the dot com boom, not something that happened in previous tech booms. Until around 2000 Palo Alto actually had a lower median…

Although what goes up can come down... if some other state or region within California permitted large amounts of construction, enabled businesses to move in, and threw a few hundred million at building a great university, property values here would drop a lot.

With less intention and planning it will take longer, but could still happen, and there are some natural pressures pushing things in that direction.

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

#266

Post by epicureanideal »

tonymet wrote: post #106
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…

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…

> We need a concept for debasement / hidden tax that allows people to hold their policymakers accountable.

This is a really good idea and I hope someone popularizes a new measure.

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

#268

Post by [deleted] »

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…

[deleted]

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

#269

Post by TeMPOraL »

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…

That's missing forest for the trees. The more important part is that average 3.7 people household was a single-income one.

I would rather disagree with GP's:

> My point is that inflation isn’t abstract and it isn’t a law of nature. It’s a deliberate approach to stealing your prosperity while you cheer it on.

A lot of the inflation, including how suddenly a single-income household isn't a viable option for most people in the West, is market working as intended - quickly consuming any surplus money, should it suddenly become greater than 0 on average, and slowly eating into any value that isn't bare-minimum strictly necessary to move a product.

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

#270

Post by tastyfreeze »

listenallyall wrote: post #151
woodruffw wrote: post #115

Earlier quoted context omitted.

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 Calif…

The comparison doesn't work on manufactured products. You can really only compare commodities.

Anything that is manufactured has a multitude of factors that will reduce cost of a product significantly over time. If the circuitry in an Xbox were constructed in 1960 no government on the planet would have been able to afford it. It would also be difficult to find enough power to run it or a place big enough to build it with the technology of the time.

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