Public Comment on Inflation Measurement

Is there a relevant time point in that presentation? It looks like the bulk of it is about inflation as in cosmology & physics, not economics.

This distrust of “politicians’ and public institutions (plus ‘the media”) is half of what’s eating away democracies all over the world. Actual corruption goes unpunished because “they are all corrupt” is easily turned from a cynical accusation into an excuse. Bitcoin is turning coal into flooding because people are afraid of the monetary crises of the 1920s (hyperinflation) and spooked by even the silliest conspiracy myths (“the FED is a private bank”).

So, yes, measures of inflation aren’t perfect. But it’s “not perfect” in the most trivial sense: even some well-chosen single item (Big Mac?) gets you a measure of inflation that will be close enough most of the time. The actual basket improves it from maybe 90 % perfect to 98 %.

Food prices are hard to notice because often instead of raising the price they make the package smaller. So on top of your 50% price increase you might get slightly less food for the dollar.

I find it interesting that the PlayStation stayed rather flat, but the iPhone went up so much over time.

8-10% inflation does not sound like it's true, but it's certainly higher than the CPI suggests.

Rent is a valid part of inflation but house prices are not. Real estate is an investment, not an expense. It doesn't factor into inflation for the same reason that stocks aren't a factor. Instead for homeowners the BLS calculates owner's equivalent rent.

https://fred.stlouisfed.org/series/CUSR0000SEHC

…and its revenue is inflation-proof at 0$.

I would like to read a point-by-point critique of Shadowstats but have yet to come across one. The wikis you've listed are more muckraking in nature than a technical rebuttal.

A poorly done critique increases rather than diminishes the credibility of the target.

In some markets, sure. However if you look at median home prices from 1980 to today and factor in interest rates (which are much lower today) and median income then you see that homes are about the same as they were in terms of monthly payment. With the upside today that early in your mortgage more of your payment goes to principal.

If interest rates were to go to 8% overnight, besides crashing the global economy you’d see home prices cut in half. Homes are priced at what people that want to live there are able to pay per month. As interest rates fall home prices rise. Like I said certain markets have outpaced but their median incomes have outpaced as well. This makes sense as the upper middle class has grown a lot the last 40 years to make up much more of the population by percentage (there’s a lot more high paying professional jobs today) and people like to live among people of similar financial classes for obvious reasons.

House prices are considered asset prices, not consumer goods.

Only shelter part of housing is in the CPI.

There is a housing component to the CPI. It uses rents instead of home prices and makes some tradeoffs, but it seems fair to me overall. If you live in SF or NYC or similar cities it can seem that CPI underestimates inflation due to high rents/home price, but it is a national level metric, so that's somewhat expected.

Houses are assets as much as they are expenses, so the CPI uses rent instead of home price.

I think this is generally right, and if "real" CPI was much higher than calculated you would see it eventually since the difference between real and calculated would be compounded over time.

However, because CPI is done at the national level while people typically live in one area, it is possible that HN readers in SF or wherever experience higher inflation than the CPI calculates. Certainly their rents have gone up much more than someone's in Kansas City.

Yes that term does seem to get commingled with different meanings. Increasing money supply vs increasing prices seem to be the main ones.

The former usually results in the latter, but not always, and sometimes with lag. And sometimes prices can rise without an increase in the money supply, for other reasons - a decrease in supply, an increase in demand due to some other factor than monetary inflation, etc.

And that's not to mention the different measurements of money - M0, M1, etc. - as subsets of monetary inflation.

I wish economists and journalists would better differentiate by using "monetary inflation", "price inflation", and/or other qualifiers for exactly which one they're talking about.