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Comment by harshaw | Hacker News Reader

Inflation data: https://www.in2013dollars.com/us/inflation/2010?amount=1. I don't think that a 20% difference means 200K is a lot less. It's a bit less.

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But that is the government inflation, which is considered by some to be fake. Shadowstats [1] says inflation would be about 5%/year if we use the same methodology as in 1990, which gives about 60% over 10 years, i.e. you'd have to make 320k now. I'm just eyeballing the chart but if we use the 1980 method (~7% a year) it's almost 100% (i.e. you'd have to make 400k now).

For another example, Dow Jones with dividends reinvested gives a 180% increase, i.e. you'd have to make 560k. Of course this is not really inflation, but it gives a sense of how much you're missing out on vs. asset owners (please correct me if this is massively wrong).

[1] http://www.shadowstats.com/alternate_data/inflation-charts

Well, yes, if you accept some official-inflation-is-fake conspiracy theory as a premise you can reach many interesting conclusions.

Its not fit for purpose, just like the fact that we celebrate increasing GDP while life expectancy has been stagnant or declining

It's not conspiracy, but an observation that hamburgers, cars, houses and yachts inflate at different rates. The gov inflation concerns hamburgers, but someone's making 200k really needs housing and that inflates much faster.

1. Rents are included in the CPI. 2. This confuses relative price changes with inflation.

> 1. Rents are included in the CPI.

Rents have remained low in my city but housing prices( which GP is talking about) have gone up over 30% last 2 years.

Its pretty easy to find a rental but almost impossible to buy a house here.

Here is housing: https://fred.stlouisfed.org/series/CPIHOSNS

House prices are simply bonds tied to rent value and interest rate and affected by certain demographic trends. The all-told carrying costs of a mortgage right now are actually lower than they were 30 years ago, considering inflation (the principal might be higher and you don't get the tailwind of dropping rates to rebalance and whatnot, but it doesn't change the fact that houses are technically more affordable, not less).

Edit: Here's a graph of housing prices when adjusted for inflation & mortgage rates: https://realestatedecoded.com/the-shocking-truth-about-house... (although the down-payment is more unaffordable, yes, but you can generally buy things with as low as 3.5% down)

> but you can generally buy things with as low as 3.5% down

no way. It is so competitive here that buyers are inundated with all cash offers.

https://accept.inc/ converts your mortgage approval into an all-cash offer. (Edit: looks like that's only for Colorado)

The craziness going on right now is due to several factors: (1) all time low supply due to pandemic restrictions/fears; (2) Work from home transforming housing values (single family homes a lot more appealing if you only work from the office occasionally); (3) Millennials aging into the housing market and boomers holding on to their properties (see 1) - also a lot of stock is now owned by investment companies / pension funds past 2008; (4) Housing is the safest way to take a leveraged short on the US dollar (which a lot of people fearing inflation want to do); (5) Capital flight from other countries like China (though that was more of a factor pre-pandemic) - real-estate is the only industry where anti money laundering provisions are severely watered down / non-existent.

uh ok. I guess i'll be renting forever :D. But hey govt says inflation is low, so all good.

Yes, and those trails from airplanes are considered by some to be mind control chemicals.

I wonder why the whole "secret inflation" theory seems so popular among techies, I see it multiple times a week on HN.

The same "techies" that are proponents of using Goodhart's law to describe measures of development effort?

https://en.wikipedia.org/wiki/Goodhart%27s_law

Or how about https://en.wikipedia.org/wiki/Campbell%27s_law ?

Both of those are good and reasonable rules to describe the world, and something that is very intuitive. That is why a lot of people find government inflation stats suspect - even if they are measured correctly!

Unfortunately, for the last few years I have noticed more and more people no longer take government inflation data very seriously. Here are two (I am sure there are more) reasons why:

Housing, Health and Education.. these very basic needs have consistently outstripped official inflation numbers. Specifically on the US coasts. Correct me if I am wrong, but I believe the cost of housing is completely left out of that inflation number. Which in my opinion is kind of silly.

The formula for the index used considers substitutions. So for example, let's say Wool gets expensive, they expect you to substitute it for acrylic. If beef gets expensive, they expect you to substitute it for chicken or turkey, and so on. This isn't the reality people _feel_. For example, I for one, would realize I am no longer able to afford wool socks, and have to make do with acrylic socks. In essence, feeling poorer than I did before.

CPI and inflation metrics generally do account for housing costs [1], but the problem is inflation in housing is not evenly distributed. If you live in a coastal city or tech hub, your housing costs have likely risen much faster than the national average. I've found it difficult to get realistic measures of city-level inflation data without trying to construct my own index from various data sources.

[1] https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

That's not really how substitutions work. Substitutions work by replacing what people used to buy with what people buy now.

Now your criticism remains valid, to a slightly lesser extent, because if everyone gets poorer and trades wool for acrylic socks, they get replaced in the basket. Not to artificially depress inflation, but to reflect what everyone (now poorer) actually buys.

The issue is, obviously you need substitutions. The finance example is going to be horses, so let's go with that. Nobody buys or rents horses anymore. They are exclusively the domain of recreation. So having them in the index would be lunacy.

One measure people use is the "big mac inflation index", a PPP index. That one would tell you that inflation between 2010 to 2020 is about 76%, or indeed 5.8% per year average.

But that's how the FED chairman Powell (and all those before) will dress it up these days.

Sure, rice, jeans and dollar store trinkets have only become 20% more expensive. The real estate, healthcare and education tell a completely different story though.

I don’t trust any inflation numbers. Financial asset inflation is out of control

Inflation measurements should be tied to location because housing costs vary dramatically and are a huge proportion of expenditure for most people.

At the same time, differing costs of living reflect differing values.

The reason the Bay Area is so much more expensive than Tulsa, Oklahoma is because many people would much prefer to live in the Bay. Adjusting completely for COL ignores the reality that living in the Bay is, to some extent, a luxury.

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