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silisili

I'm not an economist. I am a consumer, though. And I'm older, so I have 'habits' that don't tend to change.

My rent has gone up 30%. What used to cost me 100 something in groceries now regularly goes into the 200s.

I'm nothing if not an observationalist, but this CPI is horse dung.

For someone like my family, I wouldn't believe any number less than 20%.

The sad thing is, I've never talked to a single friend or family member that said otherwise.

So what is the government reporting?

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I have been tracking my household expenses religiously for years. Down to how much we spend on milk each year, or how many boxes of breakfast cereal we go through. And without changing habits (I worked from home previously) or spending any differently for most of 2020 I saw a slight upward tick that was more than I would expect for previous years, about a 10% increase across the board in terms of energy, health care costs, food costs. In 2021 that upward tick turned in to way more than just a tick.

Food habits haven't changed, nor have quantities. I shop at a mixture of Food4Less, Ralphas, Gelsons and a few small items at Whole Foods, but food expenditure has increased by 30% to 40% since start of 2020. Household energy usage has remained the same, but somehow the price is 20%+ higher than at the start of 2020. Monthly health insurance costs have increased by 17.1%

A gallon of milk or a carton of eggs is about where it has been for the past three or four years, because a gallon of milk or a carton of eggs doesn't go up by 3 cents each month, it jumps by a dollar once every three years. Low-end commodities like that tend to stay artificially deflated for a while. I am expecting milk, eggs, and other basics to jump by a dollar or two in the very near future.

I am just a single data point, but something seems "off" with all officially reported statistics. Something isn't being captured somewhere.

Thanks for posting. I'm completely unsurprised.

Do you also happen to have data from before the pandemic? What was the trend then?

I'm surprised by seeing everyone in the whole thread and the article talking about the last two years. The way I see it, both shrinkflation and "skimpflation" were already blindingly obvious way before pandemic, and looking at the stats from the last two years makes reasoning difficult because of, well, a global pandemic.

I have data for household budget going as far back as 1999. Though not everything can be inferred from that data simply because of lifestyle changes, e.g. getting married, moving to different cities, education, and changing dietary habits (cutting sugar, cutting salt, eating out less, consciously choosing less processed foods).

But 2013 to 2019 was a stable period with few lifestyle changes and the trend was around 6% per year for my "basket of household items" with the occasional bumps of "milk just went up by a dollar at the local Food4Less lower tier grocery store." The largest inflationary food items I've seen have been meat and poultry.

The largest non-food inflationary items I've seen are gasoline and health insurance. Car insurance I cannot track due to a minor "at fault" accident adjusting insurance rates in 2018. Storage locker increases by around 4% per year. Household insurance increases by around 5% per year.

My life is only a single, but extensively tracked, data point. But "something seems screwy in the state of Denmark" to paraphrase Shakespeare.

P.S. I'm not in Denmark.

>A gallon of milk or a carton of eggs is about where it has been for the past three or four years, because a gallon of milk or a carton of eggs doesn't go up by 3 cents each month, it jumps by a dollar once every three years.

because it's averaged out across multiple stores across the country?

My guess would be because it is a price that is easy to know, and one that would push shoppers away. I know that a gallon of milk is 4.99 at most grocery stores(where I live in Canada). I don't know off the top of my head the exact price for any of the other things I regularly buy. If I saw a gallon of milk for 5.99 I would assume that I was shopping for groceries at a place that has generally higher prices for all foods. I doubt this is a rational signal, but it is the way that my brain works.

There are maximum prices on a few items like milk in Canada (at least in Quebec).

Note: the regulation targets “basic” milk, not pimped out milk with omega-3, 19g proteins, without lactose etc.

That’s a Quebec thing not a Canada thing.

Huh, I'm seeing the opposite here. My health insurance premium (Kaiser) went down 5% this year, and dental insurance gave a 1-month "premium holiday" (~8% discount). Granted, that seems also related to "skimpflation", because people made fewer non-emergency visits due to the pandemic and just reduced consumption of medical services, versus individual medical services getting cheaper. But it does still save me money on my own insurance coverage, independently of my own consumption, which adds a bit of a twist.

On other big-ticket items: My rent is exactly same as it was in 2019 (I pay the same rent for the same apartment). My commute (on transit) got a whopping 25% cheaper as they slashed the price of monthly passes. For leisure, the prices of Amtrak tickets, hotels, and AirBnBs are all down a lot, at least in the Northeast, maybe in the range of 30-50%. Fresh groceries are definitely a bit up, that much I agree with. My staple Amazon Subscription orders, though, are flat to slightly down, e.g. La Colombe canned coffee is about 15% down from its 2019 prices (used to be $12/4-pack and is now $10/4-pack).

Overall my cost of living is deflating a moderate amount. I suspect some of the disconnect is that supply/demand has shifted, e.g. cars have gotten more expensive while trains/buses have gotten cheaper. So those effects partly cancel out. I'm not going to argue they fully cancel out, but for me personally I have seen slight deflation.

My Kaiser health insurance is increasing from $1392 to $1563 in December. It is actually a bigger increase this year than last year. My wife and I haven't talked to a Doctor or stepped foot in a hospital in four years.

I have noted increases in many staples on Amazon Subscriptions which include pet food, shampoo, shaving foam, pet treats and so forth. Routine pet medication at the vet has increased around 10% over the course of the year.

Oddly enough our 5lb bags of coffee have stayed the same price for almost 4 years.

CPI is a measure that's calculated by using the price of a standardized basket of things. It's indicative of inflation overall, but every person's personal inflation rate is different because it's affected by the exact mix of goods and services they buy, which aren't going to be the same as the basket.

If your family are experiencing inflation higher than 20%, it's because you're consuming more of things which inflate faster than the basket.

https://www.investopedia.com/articles/07/consumerpriceindex....

Basket of things with a vastly oversized share of cheap plastic crap made in East Asian sweatshops and or unrealistic substitutes. If 95% of Americans see a "personal inflation rate" significantly larger what the government claims, perhaps the government methodology is not particularly informative?

This is the point where the burden on proof lays with those that claim the government methodology is relevant: What is the "basket of things" composition and how many Americans have a spending profile anywhere near that?

This is a valid criticism of the methodology and if you look at a sibling of your comment, someone has posted a great resource that discusses some of this in depth. There are a lot of critics of CPI who feel it is manipulated by the BLS either intentionally or unintentionally. The methodology was also changed from being a "Cost of Goods Index" (literally the basket I described above) to a "Cost of Living Index" (which is intended to reflect the cost of maintaining a constant standard of living over time allowing substitutions in the basket but still suffering from the problem I describe above where your personal standard of living derives from the goods and services that you consume and therefore will differ from the index composition), and there are entrenched proponents of both the COGI and COLI methodologies.

I'm not an economist, but one fundamental problem with any consumer index (as far as I can see) is that as you become richer in absolute terms the marginal utility of any additional dollar goes down (eg your life doesn't change that much if you upgrade your already expensive phone but it changes a heck of a lot if you can't afford to buy enough food) and therefore poorer people experience far more harm from inflation than richer people. Not sure any index ever captures that effect adequately.

That harm does not capture the reduction in debt caused by inflation though. Inflation benefits debtors over creditors, even if it also effectively lowers wages.

That's true although if you're spending all of your income on debt service and basic living costs, then reducing the real value of the nominal of your debt doesn't in fact increase your standard of living at all. Theoretically you're better off, but all of your income still goes on debt service and basic living costs. The basic living costs have gone up in nominal terms while the debt service is still the same. It's depreciated in real value but the nominal is still the same.

On a statistical basis, the poor holds more debt. From that basis, inflation is good.

A lot of people don't realise inflation is essentially a stealth cash wealth tax. It applies to savings, debt, dollar-denominated contracts, etc.

Inflation is good only for long term debt.

Inflation is "progressive" in this sense, however everyone wealthy would hold mostly assets, not cash.

They still hold a decent amount of cash as a percentage of their portfolio. 10% of a million dollar portfolio is still $100k which is more than the average joe has. He would use that money to buy a house instead of letting it sit around.

Yes, bigger down payments suck but that is mostly a zoning/housing supply issue.

I’d guess that many (perhaps most) wealthy households hold far more dollar-denominated debt in their real-estate and business interests than they do cash.

It's very rare for wealthy people to hold 10% of their assets in cash (or even cash equivalents). When they purchase real estate they usually take out loans secured by their other assets.

But as you correctly put it, it's a cash wealth tax. The poor have all the wealth they do have in cash. Similar for those somewhat above poverty, if they done go deep on debt.

The poor don't hold debt. "I live in a nice house that's still owned by the bank" is not poverty.

And you might find that even many of the rich (who have far more in assets than they have in debt or cash) will still have more debt than cash, because while investing on debt is generally considered stupid, investing on debt that could be fully cleared by the the object invested in (house/land) as collateral is the exception. People rich enough to buy houses for renting out rarely pay them in cash. The winners of inflation debt decay are not who you think they are.

> The poor have all the wealth they do have in cash.

I would think that the poor have no cash… that's why they're called "poor" after all.

The bottom 50% of income earners can barely cover the 'necessities' (housing, food, transportation, healthcare):

* https://ofdollarsanddata.com/the-biggest-lie-in-personal-fin...

> I would think that the poor have no cash… that's why they're called "poor" after all.

They have contracts denominated in cash—for example, their wages from employment. That's where inflation tends to hurt the most since wages tend to trail behind inflation (or deflation). And of course being "poor" doesn't imply that you literally have zero savings, though you probably don't have enough to be worth the hassle and expense of a brokerage account to invest in stocks, ETFs, or mutual funds. For small amounts the transaction fees alone would be more than the gains.

Regarding the article you cited, it occurs to me that the authors never mentioned how long any given household remains in a particular category. If I took a year-long sabbatical from work, for example, then I would end up in that "lowest 20%" group with zero income while I lived off my savings, but that doesn't mean I'm experiencing any kind of financial difficulty. The same goes for students still receiving support from their parents, or for anyone who is retired and living off of a lifetime's worth of investments (though probably not pre-tax 401(k)/IRA, depending on the study methodology, since these distributions are generally considered "income" for tax purposes). "Lowest 20% by income" is not a fixed group. This is apparent simply from the fact that expenses cannot exceed income indefinitely; eventually you must either increase your income, at which point you are no longer counted in that statistic, or else decrease your expenses. But the idea of a shifting group of households which temporarily earn less than they spend paints a very different picture than the one the article implies.

It's not a stealth cash wealth tax. It's literal debt forgiveness. You can even call it a collectivized form of continuous insolvency. E.g. instead of every 20th debt contract being forgiven entirely 5% of every debt contract is forgiven.

The benefit is that if the creditors (mostly upper classes) refuse to forgive the debt then you don't need an angry mob with pitchforks to cancel the contract (revolution).

Upper middle class and rich people benefit from debt. Lower middle class and poor people suffer from it.

- lower middle class/poor: A cleaner working hand-to-mouth taking a payday loan isn't inflation hedging. She's paying through the nose for the privilege of a 33% loan because she's a risky debtor.

- middle class: I make money on my mortgage. I see my 1.22% 20 years fixed mortgage melt away against a salary that is raising with inflation. Plus I get rewarded by government with a tax deduction. Similar story for our rental.

- rich: Elon Musk can live off margin loans against a fraction of his investment portfolio if and when it makes sense.

> middle class: I make money on my mortgage. I see my 1.22% 20 years fixed mortgage melt away against a salary that is raising with inflation. Plus I get rewarded by government with a tax deduction. Similar story for our rental.

The mortgage interest tax deduction only applies if you itemize, which literally 90% of people do not do as of 2019 IRS statistics. Effectively, there is no mortgage interest tax deduction for middle class since the 2017 tax cut ACA jobs act.

I don't live in the US. Plenty of places have some form of mortgage fiscal stimulus. Even without the fiscal advantage, I would still be making money on this.

My bad. I did not know anywhere else offered mortgage incentives. Chalked tax deduction up to being uniquely US way of implementing regressive taxes.

> see my 1.22% 20 years fixed mortgage melt away

Wow, if you don't live in the US, where are you getting a 20 year fixed rate?

Honestly just curious as I thought those were really only a US thing.

The mortgage is in Belgium. Friends have even lower fixed rates. Some others have negative interest rates on their adjustable ones. Their bank literally pays them.

Wow, I'd heard about that but it seems so alien to me here in ireland (we get at best 2% ten year fixed, and that's only under certain circumstances).

Mind you, it's literally impossible to get evicted from your primary home here, which is presumably what drives the differences.

> Their bank literally pays them.

How does this work? Do they get a free house and a check cut monthly? Or is the mortgage cheaper than what it would have been?

Creditors take inflation into account when making loans.

Only higher than expected inflation helps debtors. Lower than expected inflation hurts debtors.

I'm not sure why you think Creditors would consistently underestimate inflation. Maybe they do, but why would they?

One thing I am sure of, is that when inflation expectations change a lot so that there is a lot of doubt as to what future inflation will be, then creditors charge a higher premium for that perceived increase in inflation risk. That hurts debtors.

What you say makes logical sense, but is hard to square against the fact that, as a nobody, I can borrow $1M at under 3% fixed interest for 30 years to buy a house.

The creditor who will ultimately hold that paper has a very different outlook on inflation rates than I do, but I’m happy to take the loan, especially since a side-effect is having a place to live.

> What you say makes logical sense, but is hard to square against the fact that, as a nobody, I can borrow $1M at under 3% fixed interest for 30 years to buy a house [...] The creditor who will ultimately hold that paper has a very different outlook on inflation rates than I do,

Such questions deserve answers.

There is a lot that I skipped over, not wanting to get into the weeds of economic theory and start more arguments about whether the Fed controls rates or whether markets do (orthodox theory says markets control real rates and the fed only controls nominal rates, and thus inflation), and how savings demands respond to interest rates, and whether mortgages are risk free rates or not.

All of that complicates the simple picture I painted, but I think that picture is basically correct.

Suffice it to say that in terms of risk-free rates, the creditor's alternative is to buy a TIPS -- inflation protected bond -- which currently yields -1%

https://www.cnbc.com/quotes/US10YTIP

So we are living in a very low interest rate world right now.

Given that most likely your mortgage is government guaranteed (what mortgage isn't?) the entirety of the 3% you are paying is just as an inflation hedge plus some risk of pre-payment -- again, I have no idea what kind of points you have and the specific terms of the loan.

If inflation was believed to be zero, you could probably get the same mortgage for less than 1%, maybe even 0%.

We live in a world with very low real rates, but that does not mean that creditors don't take inflation risk into account.

> Suffice it to say that in terms of risk-free rates, the creditor's alternative is to buy a TIPS -- inflation protected bond -- which currently yields -1%

TIPS have a yield that is referenced to the CPI (attempting to present a real yield), not a yield expressed in nominal dollars, so direct comparisons against mortgage rates (inherently nominal yield) are not very productive.

The close equivalent to the 30YR mortgage rate is either the 10-year Treasury (currently yielding ~+1.6%) or, if you insist on matching maturities, the 30-year (currently yielding ~+2.0%)

So, whatever risk premium the lender is demanding on a 0-points, 30-year fixed mortgage, it's a maximum of 1.4% (3.0%-1.6%). As a borrower, I'll happily take that deal.

That 3% fixed interest rate isn't a real market rate. Most of those mortgages are purchased by Fannie Mae and Freddie Mac. Those companies are too big to fail and sponsored by the Federal government. If they went away then 30 fixed mortgages would barely even be available, or at least the interest rates would be far higher.

A jumbo loan (such as the quoted rate above from today for a $1MM mortgage) is not eligible for backing by Fannie Mae or Freddie Mac.

> What you say makes logical sense, but is hard to square against the fact that, as a nobody, I can borrow $1M at under 3% fixed interest for 30 years to buy a house.

that's canceled out by prices being higher because every other buyer has access to the same rates. Your monthly payments works out to be the same in the end because everybody bids up to the max they can afford.

> Creditors take inflation into account when making loans.

How? I'm pretty sure that is determined by the market. 10 year treasuries are yielding 1.587% which is less than inflation and people still buy them because your alternative is cash with even worse returns.

> I'm not sure why you think Creditors would consistently underestimate inflation. Maybe they do, but why would they?

Hard to predict, in general. Would you have predicted we’d be looking at 5% inflation right now, three years ago? We haven’t seen inflation like this in decades.

> That hurts debtors.

Only if they have variable-rate loans.

The broader point here is that it’s creditors (and the wealthy) who bemoan inflation the most because it means their rents are going to be worth less.

> Creditors take inflation into account when making loans

No, they do not, because they typically only hold the note for a few days before it gets securitized and sold onto a market that is pinned by a very large, inflation-agnostic player: The Fed.

Now, we'll see what happens to this market if and when they begin to taper, but I think all the non-Fed players in this market remember what happened the last time they tried it, and they're all betting, correctly, that Powell will be forced into not only NOT tapering, but increasing purchases.

All of these markets: treasuries, mortgages, auto loans, and junk bonds, know for a fact that there will always be an artificially high bid for their toilet paper. Why would they care?

I'm not an economist, I'm far from it.

It sure seems like the big three these days are housing, food, and gas.

Housing is complicated, because it's less elastic. Moving sucks, is expensive and kind of emotional. It's sorta sticky because it's such an ordeal, so (I think) there's some scalping, charging a bit more because making a switch is just a pain in the ass.

Food is weird. if you can put together a hotplate and a sink, food can be relativly inexpensive, and tasty, but time consuming. If you can't it's pretty ugly. Personally, I'd probably just go with multivitamins and beer. Dual duty as calories and entertainment. That's a disaster long term though.

Gasoline sucks because it's a magnifying effect. Take a bag of rice. the rice gets trucked somewhere to get packaged. the bag gets trucked from a factory, the plastic gets trucked to the factory. Every step has a transportation cost, and it compounds.

I'm not rich. I could take a long break from work if I needed to, but I gotta work. I'm very lucky to be where I am. CPI makes a lot of sense for me.

I think it's not so great because a cop and a teacher couple with no kids, totally reasonable professions, damn near a Rockwell painting, struggle.

I don't think it'll ever be easy for everyone. but damn. does it have to be so damn hard at the bottom? I think the CPI doesn't really work out for the bottom N% and I'm not really sure of the value of N. I hope N is still kinda small, because if N gets big, things get really ugly for everyone.

I dunno. CPI is a metric. it has a meaning. mean median and mode have meaning, but they don't tell the whole story. I think CPI highlights some things, but don't think for a second it's the whole story.

The Economist publishes a fun and simple metric called the Big Mac Index.

They present it as a way of looking at forex rates. If 1 USD buys you 1 swiss franc, but a Big Mac costs $5 here and 7 CHF there, then maybe the franc is overvalued. In any case you lose McDonald's purchasing power by converting.

But you could just as easily use it for inflation.

Big Macs are a stable product. A Big Mac sold in 1985 is very similar to one sold yesterday. Also, it includes a good mix of basic inputs. Land rents, transport costs, labor, and food ingredients.

Here's the raw data.

https://raw.githubusercontent.com/TheEconomist/big-mac-data/...

In the US, a Big Mac cost $2.54 in 2001 and $5.65 in 2021.

That works out to 4.0% annual inflation.

https://www.google.com/search?q=(5.65%2F2.54)%5E(1%2F20)&oq=...

The official numbers were 2% that entire time. Those come from a complex calculation using an always-shifting basket.

Big Mac's have gotten smaller though. So even there is an example of shrink-flation...

Really? I thought it was becouse I was a kid and smaller myself.

The Big Mac index is pretty stupid though, since the ingredients in various countries are different and not sourced from the same place. Here en Europe McD tries to be somewhat middle class while I'm the us it's absolute trash.

Was going to say that. They have a green logo and regularly claim some of their products are hyper local now here in CH. I doubt they have to do this in many other countries.

Other than that price differences in food between $ and CHF are likely mostly explained because work hours simply cost a lot more around here.

> I doubt they have to do this in many other countries.

Not sure why you would think that. McDonalds is famous for catering it's menu and service to it's locale.

In Australia they were required to serve real chicken in their nuggets, and they're always advertising that they use locally sourced beef for their burgers.

They also rebranded in a sense to upmarket themselves, and started selling salads, cakes and coffees in order to sneak a foot into the Australian cafe scene.

> McDonalds is famous for catering it's menu and service to it's locale.

Hence, it’s a non standard product, and a pretty dumb basis for an index.

It was never intended to be taken seriously. The reason that it is taken somewhat seriously is because it turns out to be a much more reliable indicator than you might naively expect. That said, no one truly relies on it for anything more than a rough indication.

Dumb compared to what? A basket of goods curated by a government who have a vested interest in getting certain numbers out of the formula?

What do you mean by real chicken? What are McNuggets made of in the US?

I saw Americans amazed at Europe’s “real cheese”, and Coca-Cola with “real sugar”. I have never heard the explanation for “real chicken” yet.

This is funny and scary at the same time.

I believe the ingredients were always different due to Australia's "Allowed Substances" list and local ingredients availability. Similar to the controversy over "Pink Slime" for their beef patties never being an issue here, because the substance was already banned.

USA (according to https://www.mcdonalds.com/us/en-us/product/chicken-mcnuggets... ) :

Ingredients: White Boneless Chicken, Water, Vegetable Oil (canola Oil, Corn Oil, Soybean Oil, Hydrogenated Soybean Oil), Enriched Flour (bleached Wheat Flour, Niacin, Reduced Iron, Thiamine Mononitrate, Riboflavin, Folic Acid), Bleached Wheat Flour, Yellow Corn Flour, Vegetable Starch (modified Corn, Wheat, Rice, Pea, Corn), Salt, Leavening (baking Soda, Sodium Aluminum Phosphate, Sodium Acid Pyrophosphate, Calcium Lactate, Monocalcium Phosphate), Spices, Yeast Extract, Lemon Juice Solids, Dextrose, Natural Flavors.

Australia (according to the PDFs here https://mcdonalds.com.au/maccas-food/nutrition ):

Ingredients: Chicken, Water, Flour (Wheat, Corn), Canola Oil, Starch (1420, 1422, Corn, Wheat, Tapioca), Mineral Salts (450, 500, 451, 341, 327), Salt, Spices (Celery, White Pepper, Black Pepper), Sunflower Oil, Dextrose.

> What are McNuggets made of in the US?

It was Pink Slime for awhile. "Real Chicken" is the continuing strategy to claw back from the PR nightmare.

https://www.eatthis.com/mcdonalds-debunks-rumor-about-mcnugg...

https://colors-newyork.com/who-uses-pink-slime-list-2020/

Lol, McDonald's is "locally sourced" everywhere. It's been in their branding strategy for the last ten or so years.

I honestly had no idea, I just noticed the logo being not green in the surrounding countries. I haven't put a foot in any of their stores for over 15 years now

Big Mac depends on the popularity of MacDonalds which is incomparably higher the US than most of the EU (or Switzerland). MacDonalds is just not popular and as sibling Galaxeblaffer mentioned it's not directly targeted as a lower class restaurant. In most places/countries I have seen Big Mac are not even advertised. Some of the local regulations would prevent the same Big Mac prepared, either.

Although if we assume any technological progress in the last 35 years a big mac should probably have gotten a little bit cheaper. So the impact of inflation-causing-forces (aka, the reserve banks) is probably higher than 4%.

Technological progress in hamburger making? It’s meat between bread. There’s only so much progress you can make.

What keeps the CPI down is technological progress in other goods, like cars and TVs.

It isn't my area, but something called "Total Factor Productivity" is up around +50% since 1985 [0].

There are a lot of ways to make things cheaper. The world has seen startling progress in logistics, organisation, science and tech in the last 30 years. Some of that is applicable to gathering food more cheaply.

I suppose maybe all the gains could have been eaten up (heh heh) by population growth. The underlying equilibrium here isn't static, at any rate. The real price of a hamburger will not be steady.

[0] https://www.ers.usda.gov/data-products/agricultural-producti...

Part of the logistics improvements over the decades is "just-in-time" delivery at multiple stages, from raw materials to store delivery. The pandemic knocked that out of whack resulting in supply chain issues. The cost of mitigating that in the short term and longer term undoing some of the over-optimization for efficiency at the expense of robustness will be passed on to the consumer.

McDonald's was one of the prototypes of the fast food industry. There was absolutely technological progress in food preparation to be made when they did that. It seems silly to assume they wouldn't keep that up.

A couple potential sources of efficiencies:

- more reliable bun-making machines that need a lower ratio of human oversight / bun produced.

- more automation in packaging the meat patties.

Of course there is plenty of progress to make. You have to look at the whole value chain, not just the last step that happens at the restaurant. Bread and meat have to be made, preprocessed and shipped. Plenty of things along the way that are subject to optimization.

That’s like dismissing technical innovation in film making as it is eventually photons hitting eyeballs.

There are ways. Automate the burger making machine. Reduce inventory, "just in time" supply chain. Pay the workforce less, aka "financial innovation". Substitute lower quality ingredients. Shrink the burger size. Harvard, here I come for my MBA.

So much innovation!!

I worked part time at a McDonald's from ~1991-1995. At the beginning of that period, we immediately assembled Big Macs with freshly grilled patties, then let them sit in a warmer for <=10 minutes before throwing them out.

By the end of my tenure at McDonald's, we were cooking patties and storing them in steam warmers for up to 30 minutes before tossing them. The same patties were used for regular burgers and Big Macs. We'd create Big Macs as needed by demand, assembling them later.

I don't know the #s, but was told that this change was to reduce product waste.

Grilling equipment and process also changed over this time period, slightly reducing the number of staff needed to run the grill and reduce the likelihood of overcooked (and thus wasted) meat.

I imagine numerous other efficiencies/changes have been made over the decades that would influence the cost to make Big Macs.

Just a few examples of things that I suspect have improved the cost of running a McDonald's (or network of them) or other similar businesses:

1) Self-order kiosks. Definitely reduce costs and required number of workers needed at any time substantially.

2) Scheduling applications. More efficiently schedule workers, trade shifts, etc.

3) Improved warehouse, distribution infrastructure, logistics, coordination software, optimization around deliveries, predicted usage, etc.

The self order kiosks are craptastic. I hate them. The mobile app is somewhat decent.

Honestly, what they need is a voice AI to take your order in the mobile app.

Interesting. Self order kiosks are amazing. I never have a clerk take my order incorrectly, never have to repeat myself.

>Technological progress in hamburger making? It’s meat between bread.

That big mac is at the end of a literally global supply chain. The cost of the tires on the car of the fry cook and the number of temperature sensors one can afford to put in the reefer ship that gets the tomatoes from Argintina all have an impact on the overhead of a big mac. And this is in addition to all the direct process improvements others have mentioned. Heck, the internet has opened up a whole new world of operational efficiency for the farmer that grows the grain that feeds the cattle. He can buy parts for his machines or compare spec sheets for fertilizers from his iphone while sitting in the cab of his tractor that almost drives itself. In 2001 he had to thumb through a catalog or call someone.

The right-to-repair movement is coming from farmers who are unable to do better than call someone, in 2021, because their large farm equipment (tractors, etc) are locked down more thoroughly than an iPhone, with large support contract requirements on top of that. Not that it changes your point, but the inability to fix things will certainly change how the US market behaves.

> should probably have gotten a little bit cheaper.

The price of a big mac obeys supply and demand.

The actual cost of producing it is but one factor in many in the final price, and likely not the most important.

Where the hump is in the price vs actual volume of Big Mac sold curve actually is what matters.

They also regularly reiterate that the index is meant partially in jest, and that you shouldn't expect it to generalize in any kind of highly accurate way. Also, the leap from forex to inflation is a big one; AFAIK they haven't argued the data is valid to use as you are here, which is different from judging exchange rates (it must surely be normal for various kinds of goods and services to inflate differently, right?). They simply point out that it works surprisingly well for something so simple.

Even assuming the 2% numbers are more representative of the average household, the 4% big mac number sounds entirely consistent with that.

TL;DR: this is interesting, but I don't see how this data clarifies anything.

Great - now The Economist needs to add a skimpflation factor, probably by doing something like buying a real Big Mac and then weighing the patty, and the wait time. (Although really everything about the experience can be skimped on, like taking away ketchup.)

> What is the "basket of things" composition and how many Americans have a spending profile anywhere near that?

Well:

> 2. How is the CPI market basket determined?

> The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought. There is a time lag between the expenditure survey and its use in the CPI. For example, CPI data in 2020 and 2021 was based on data collected from the Consumer Expenditure Surveys for 2017 and 2018. In each of those years, about 24,000 consumers from around the country provided information each quarter on their spending habits in the interview survey. To collect information on frequently purchased items, such as food and personal care products, another 12,000 consumers in each of these years kept diaries listing everything they bought during a 2-week period.

> Over the 2 year period, then, expenditure information came from approximately 24,000 weekly diaries and 48,000 quarterly interviews used to determine the importance, or weight, of the item categories in the CPI index structure.

* https://www.bls.gov/cpi/questions-and-answers.htm#Question_2

The BLS' CPI isn't written on some set of secret scrolls. If you're curious about how it is configured just look it up.

You could … you know Google it yourself.

https://www.bls.gov/cpi/methods-overview.htm

Ever consider you are special? If you’re posting on this site, chances are you are more educated, richer, and better employed than most of your compatriots in whatever country you’re in. Of course luxury goods inflate faster. We can afford it.

>Basket of things with a vastly oversized share of cheap plastic crap made

The "basket of things" is made from the ratios of things consumers buy. BLS explains the methodology and lists the basket, and how it evolves as people buy less horse carriages and more cars, less giant radios and more iPhones, and so on.

Making a basket that better represents inflation would be worth a lot of money, and a lot of groups try, but none really do any better than the BLS.

For example, the Billion Prices Project out of MIT tracks a vastly larger number of things, but ends up with the same inflation rates http://www.thebillionpricesproject.com/

> What is the "basket of things" composition and how many Americans have a spending profile anywhere near that?

The BLS isn’t hiding this information, it’s publicly available. The burden of proof would be on you to provide research on why that methodology is incorrect.

https://www.bls.gov/news.release/cpi.nr0.htm

> The CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 6,000 housing units and approximately 22,000 retail establishments (department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments). All taxes directly associated with the purchase and use of items are included in the index. Prices of fuels and a few other items are obtained every month in all 75 locations. Prices of most other commodities and services are collected every month in the three largest geographic areas and every other month in other areas. Prices of most goods and services are obtained by personal visits or telephone calls by the Bureau’s trained representatives.

> why that methodology is incorrect

A lot of people take issue with hedonic adjustments, substitution threshold, etc - but the specific methdology used is far less important than the fact that they're simply lying about the data.

For one example, the obvious elephant in the room is the shelter category. In the last year, rents are up 12%[1], and home prices have soared nearly 20%[2]

Yet, from your own source, the BLS is claiming 3.2% for the shelter category.

It's not so much that the methodology is wrong (although that argument could be made as well), but that they're flat out lying.

And then you have to contend with the Gell-Mann amnesia effect: if they're lying to your face about the shelter category, what makes you think the data in any of the other categories, for which you have less third party data to corroborate, are not also completely fabricated?

[1] https://www.apartmentlist.com/research/national-rent-data [2] https://fred.stlouisfed.org/series/CSUSHPISA

> and home prices have soared nearly 20%

I wonder if they're able to discount this because the low interest rates mean that monthly payments have not increased 20% for most mortgage borrowers.

If you're talking YoY numbers, which we are, this would actually work against home buyers because rates are higher now than they were a year ago.

==For one example, the obvious elephant in the room is the shelter category. In the last year, rents are up 12%[1], and home prices have soared nearly 20%[2]==

The median person does not see a 20% increase in housing prices if they are not currently purchasing a home. I have a 30-year mortgage and my housing costs have not increased since I purchased it. Add in the 65% home ownership rate and it isn't out of question that a large portion of the country isn't seeing as much housing inflation in their actual budgets.

Home prices are not included in the shelter category. Homeowners are considered to be paying an implicit rent as their cost of shelter, which is based on the market rate of a comparable rental.

Your source for rentals looks at the cost of new leases. The BLS methodology looks at the most recent rent of a sample of units, regardless of when the rent was set.

We would expect your source to report a higher increase, because its methodology is more responsive to short term changes. That does not show that the BLS is lying.

You've got some big misunderstandings here.

1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases, they aren't going to agree with tracking overall rent.

2) When you buy a house, you get two things: shelter and an investment asset. The inflation statistics are only interested in shelter, not investments, so they disaggregate them. They do this by computing the rent for an equivalent dwelling. For this reason, the home price index won't agree with the inflation statistics either.

ok.

> 1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases

The vast, vast plurality of residential leases are for 12 months - and the vast majority are for 6, 12, or 18 months. So no, you're flat out wrong, here. We're talking YoY numbers, so these values reset literally at the end of the timeframe we're discussing.

> 2) When you buy a house, you get two things: shelter and an investment asset.

Cool. Home ownership is at a multi-generational LOW in the United States, with a huge proportion of the HN demographic comprising those currently priced completely out of this market. The OER metric weighting is not updated frequently enough to sufficiently account for this fact.

The reality is that between shelter, fuel, and food, our cost of living is skyrocketing on the order of 12% per year, and the CPI understates this for obvious political reasons. The real yield on a 10y treasury is about -10%, so it's no wonder that obvious scams like AMC, JPEG NFTs, and Shiba Inu (the coin, not the breed) are so popular. You reach for yield any place you can.

What goods and services, what weights, what substitutions? Devil's in the details.

Good place to start your research: https://www.bls.gov/cpi/

I'm not taking the bait. As far as I'm concerned, CPI methodology is a truism worthless by itself. Like saying "goods and services cost money". If you want to argue the specific numbers issued by the government are representative of the evolving purchasing power of the dollar, you have to do the work to prove it.

What goods, what weights, what substitutions?

> What goods, what weights, what substitutions?

The government has done this work and open sourced their calculations. Your unwillingness to accept it isn't proof that it doesn't exist.

To illustrate my point, here is a piece of the "Item replacement and quality adjustment" methodology. I cut it off where the table starts: https://www.bls.gov/opub/hom/cpi/calculation.htm#item-replac...

>Item replacement and quality adjustment

One of the more difficult problems faced in compiling a price index is the accurate measurement and treatment of quality change due to changing product specifications and consumption patterns. The concept of the CPI requires a measurement through time of the cost of purchasing an unchanging, constant-quality set of goods and services. In reality, products disappear, products are replaced with new versions, and new products emerge.

When a data collector finds that he or she can no longer obtain a price for an item in the CPI sample (often because the outlet permanently stops selling it), the data collector uses the CPI item replacement procedure to find a new item. Each priced item stratum in the CPI contains one or more ELIs. CPI commodity analysts have developed checklists that define further subdivisions of each ELI. When seeking a replacement in a retail outlet, the data collector first uses the checklist for the ELI to find the item sold by the outlet that is the closest to the previously priced item. Then the data collector describes the replacement item on the checklist, capturing its important specifications. The CA assigned to the ELI reviews all replacements and selects one of three methods to adjust for quality change and to account for the change in item specifications.

The following example describes the most common type of quality adjustment problem. Assume that a data collector in period t tries to collect the price for item j in its assigned outlet and is not able to do so because the outlet no longer sells this item. (A price for item j was collected in period t–1.) The data collector then finds a replacement item and collects a price for it. This replacement item becomes the new version v+1 of item j. The commodity analyst decides how the CPI treats the replacement. The commodity analyst has the descriptions of the two versions of item j. In addition, he or she has the t–1 price, , for the earlier version v and the period t price, , of the replacement version v+1. The following matrix displays the information available to the commodity analyst:

This is the same administration that claimed we saved $0.49 on a 4th of July BBQ this year, bec they cut out all the meat compared to the BBQ last year. I’m sorry but you can explain all you want. I’m not buying it (at any price)

Where?

I'm searching that number and I can't find anything.

I found this, which is comparing the same quantities and has five pounds of meat. https://twitter.com/WhiteHouse/status/1410709115333234691

There's a bunch of complaints about other prices, and people pointing out the prices are up 8% since 2019, but I don't see anything about "cutting out all the meat" and I don't see the number 49 anywhere.

And the ground beef had the second biggest percent drop in price in that list, anyway.

The Tweet you noted is the official tweet on this. The parent quote is relying on existing "rebuttals" of that post by conservatives, which have eventually become broken telephone to the degree that the parent comment believes Joe Biden banned meat to falsely reduce the cost of July 4th.

It's funny because the actual quote is stupid enough -- trying to emphasize some marginal rounding error national savings on 5 pounds of meat when the entire world has been exploded for the last two years is a baffling claim and an obvious attempt to put lipstick on the whole situation, these guys are absolute clowns, and the April-onwards hubris of "COVID's over, we saved the day!!!" is just a national embarrassment.

The specific "ban meat" bugbear has been a very active talking point among conservatives. You see, the Green New Deal (which is predicted in the book of Revelation) involves Andrea McDonald-Cortisol personally banning you from eating meat.

The ground truth at the heart of it is that the Green New Deal, which is as much an expression of intent as it is an actual policy document, correctly notes that cattle raised for beef contribute to greenhouse gasses (both through methane production, CO2 production, and clear-cutting of valuable carbon sinks to produce grazeland). This is of course indisputably true. The document doesn't actually prescribe any restrictions on meat so much as it acknowledges that the size of meat's contribution to our climate economics makes it unlikely we'll hit long term targets without rethinking our relationship with meat. Compound that with the fact that some liberals, including Barack Hussein Obama's awful wife!!!!, did initiatives like a "meatless monday", and you have all the proof you need that liberals are banning your meat.

It is less clear to me who is the first particular commentator to combine the "Biden is going to ban meat (and guns, and god, and everything else you hold dear, which is not a surprise because he stole the election, and he's senile)" argument and the "Biden claimed the 4th of July will be cheaper which is false because we have Zimbabwe level inflation" argument.

A few random sources of very concerned RW commentators talking about liberals taking away your meat, all before the present controversy:

https://www.washingtonpost.com/nation/2019/03/01/latest-righ...

https://www.washingtonpost.com/nation/2021/04/26/republicans...

https://edition.cnn.com/2021/04/26/politics/fact-check-biden...

As a commentary on the power of information bubbles, I weakly follow a handful of conservative figures. Yet this is the first time I hear about this particular Joe Biden comment, forget about him banning meat to accomplish the feat.

Funny enough, I just noticed that your sources are liberals dunking on conservatives. Oh dear, this is as far deep down the partisan insanity of contemporary US discourse as I'm willing to go.

Lol. That’s quite the strawman you built me up to be. I saw the original tweet back when it was posted, I just remembered previous years had buns for those burgers, I misremembered what they had taken out and commented off the cuff.

No where did I say I thought Biden was taking away my meats (smoked or otherwise), I’m not really sure how to respond to any of the other lies you posted about me but to call them outright lies that shouldn’t be part of any civil conversation between two human beings that don’t know each other. It strikes me that you came up with a conspiracy about me to lampoon right wing conspiracy theorists. Who really is more ready to believe lies?

Yea that's the tweet. First, it simply doesn't match people's own experiences, or the govt's own data. The tweet says ground beef is down 8%. However, somehow, in September (just 2 months later) inflation data showed beef was up 12% YOY: https://www.npr.org/2021/09/14/1036678722/chicken-beef-pork-...

Secondly, to somehow think 16 cents -- in the middle of a pandemic -- is worth a high-five, a bunch of jokes, and evidence that "the Biden economic plan is working" (what economic plan? nothing has passed yet), just shows that this administration is absolutely tone-deaf when it comes to the people it supposedly represents.

Yeltsin Era.

> Secondly, to somehow think 16 cents -- in the middle of a pandemic -- is worth a high-five, a bunch of jokes, and evidence that "the Biden economic plan is working" (what economic plan? nothing has passed yet), just shows that this administration is absolutely tone-deaf when it comes to the people it supposedly represents.

I think a mere "it hasn't gone up" would be a reasonable thing to be happy about among all the inflation. I wouldn't say "the Biden economic plan is working" about it but I feel like the criticism went to unreasonable places.

You’re right. Sorry I did see that tweet when it originally was posted, in previous calculations I remembered there being other foods, which they took out to get to their calculations. and this year they congratulated themselves by taking it out to save money. I commented off the cuff at 3am my time, I should have done a litte bit of research beforehand.

An interesting point raised in the NPR piece is that sometimes your basket stays the same at the same price, but the content is actually inferior in subtle and not so subtle ways.

My personal observation on the snacks I buy: they are the same volume and taste mostly the same, but the ingredients shifted over time, in particular relating to flavor (e.g. less sugar and more "sugary stuff")

BTW In parallel they introduced "rich" versions that are more "luxury", clearly distinct from the standard product, and contain better ingredients overall. I'd expect a number of people to have switched to the pricer version, even if they were really seeking the "old" standard version.

I think they try to account for this in a hedonic index - https://en.wikipedia.org/wiki/Hedonic_index

Pretty sure that only accounts for easy-to-measure headline specifications - for example, it takes into account that people are buying 55" TVs when a few years ago they might've bought 32" TVs, but ignores the fact that you need to buy a 55" TV to get similar sound and picture quality to a 32" TV from a few years ago due to quality reductions in smaller sets. Also, I strongly suspect any methodology using measurements of how much extra people were willing to pay when both were available overestimates the value of the improvements to all the other people who switched to the "better" product when the cheaper one was discontinued, since most of them didn't consider paying the extra to be worth it. For example, if someone needs a flash drive to transfer small documents around buys a 32GB one when they would've bought a 8GB one a few years ago because that's now the option that's cheap to manufacture and readily available, they don't get the same benefit that someone who paid extra for the 32GB model over the 8GB a few years ago did.

Your facts are wrong. At the same price point, the 32" TVs available today have better picture and sound quality than those from a few years ago. Check the archived manufacturer specifications and independent reviews.

They also have ads and harvest viewing data because of "smart" features. I'm convinced that failing to treat collected user data and wasted time as a real cost distorts economic analysis of the modern tech sector.

For example, you could argue that no one is harmed by Google's near-monopoly on search because consumer prices aren't going up (it's still free!). But if you consider data collected and time wasted scrolling past ads Google's services have been getting steadily more expensive for years.

Of course measuring these costs in an consistent, objective way is extremely difficult :(

Black beans are another example. There are various brands available here. The expensive ones had more/all beans that were black in colour while the cheaper, particularly store brands, were all dark brown. Presumably there are different grades of beans so the price of the can was a predictor of the colour of the contents. Now when you open a can, regardless of brand, they are almost universally dark brown.

I actually noticed this too the other day with my regular brand. The beans in the package was brown. Never seen that before so I was mildly confused.

> An interesting point raised in the NPR piece is that sometimes your basket stays the same at the same price, but the content is actually inferior in subtle and not so subtle ways.

And sometimes the content is actually superior. A US$ 30K nowadays is generally much better than a similarly priced car from 10 or 20 years ago. The iPhone was released in the United States in 2007 at the price of $499 for the 4 GB model and $599 for the 8 GB model: what kind of tech can you get for the same prices nowadays?

Everyone seems to ignore deflation, especially due to technology. This 1991 Radio Shack add illustrates the point quite well IMHO:

> There are 15 electronic gimzo type items on this page, being sold from America’s Technology Store. 13 of the 15 you now always have in your pocket.

> So here’s the list of what I’ve replaced with my iPhone.

> * All weather personal stereo, [*US*]$11.88. I now use my iPhone with an Otter Box.

> * AM/FM clock radio, $13.88. iPhone.

> * In-Ear Stereo Phones, $7.88. Came with iPhone.

> * Microthin calculator, $4.88. Swipe up on iPhone.

> * Tandy 1000 TL/3, $1599. I actually owned a Tandy 1000, and I used it for games and word processing. I now do most of both of those things on my phone.

> * VHS Camcorder, $799. iPhone.

> * Mobile Cellular Telephone, $199. Obvs.

> * Mobile CB, $49.95. Ad says “You’ll never drive ‘alone’ again!” iPhone.

> * 20-Memory Speed-Dial phone, $29.95.

> * Deluxe Portable CD Player, $159.95. 80 minutes of music, or 80 hours of music? iPhone.

> * 10-Channel Desktop Scanner, $99.55. I still have a scanner, but I have a scanner app, too. iPhone.

> * Easiest-to-Use Phone Answerer, $49.95. iPhone voicemail.

> * Handheld Cassette Tape Recorder, $29.95. I use the Voice Memo app almost daily.

> * BONUS REPLACEMENT: It’s not an item for sale, but at the bottom of the ad, you’re instructed to ‘check your phone book for the Radio Shack Store nearest you.’ Do you even know how to use a phone book?

> You’d have spent $3,054.82 in 1991 to buy all the stuff in this ad that you can now do with your phone.

* https://www.huffpost.com/entry/radio-shack-ad_b_4612973

That US$1600 Tandy 1600 runs a 286 CPU and has a 20MB hard drive, and supported 640×200×16 resolution (720×350 mode for monochrome monitors):

* https://en.wikipedia.org/wiki/Tandy_1000#Tandy_1000_SL_and_T...

What kind of system can you get for $1600 nowadays?

I always found it funny how most economists claim that deflation would be disastrous because customers would keep delaying purchases while waiting for prices to drop further. And yet everyone keeps buying computers even though we've had almost continuous deflation for decades.

Never connected it with the word "deflation", but I guess I figured out a counterargument as a kid: back then, if you bought a mobile phone contract, you'd find yourself regretting it in less than a month, because the same company now offered a better deal; few months later, a better deal with a better phone. And here you are, locked into a static deal for the next two years.

But well, you have to buy that phone eventually, right? So you take the best deal you can find, and stop worrying about it. That's the only sane way.

So in general - customers will delay purchases until the reasons they want to make the purchase outweigh the expected savings from delaying further.

I've also found the reverse to apply: for example, taking out a mortgage, I opted not to hurry despite fast-rising prices, because I judged the money saved on doing it earlier would not offset the mental cost of adding a house searching and mortgage process on top of two other highly-taxing life events.

Until they don't:

The Osborne effect is a social phenomenon of customers canceling or deferring orders for the current, soon-to-be-obsolete product as an unexpected drawback of a company's announcing a future product prematurely. The term was coined in reference to the Osborne Computer Corporation, a company that took more than a year to make its next product available, and eventually went bankrupt in 1983.

https://en.wikipedia.org/wiki/Osborne_effect

That doesn't appear to be a real effect for the electronics industry in general. When Apple announces the iPhone 13 consumers keep buying the iPhone 12. Retailers just cut the price of the older model to close out their stock.

That just adds jitter on a month to month basis. Purchases remain nice and steady over time.

The issue here is that for most people (as opposed to highly paid tech workers) these items are all luxury items that are rarely replaced, as opposed to food and energy which are necessities of life. I know a number of university students who are using 4-6 year old laptops to do their work. The fact that they can get a better laptop for the same money is irrelevant because they are spending that money on things like gas to get to classes and work.

I think the point stands. A 4-6 year old laptop today is significantly more powerful than a 4-6 year old laptop 15 years ago.

Though, the accounting for this ad, we don't see the inflation adjusted price - because $1600 in 1991 isn't the same as $1600 now.

That $1600 Tandy would equate to ~$3250 in Today's day and age.

So, essentially an M1 Pro/Max MacBook Pro.

Even if you use the nominal value of $1600 as opposed to the "real" value, you're getting way more capabilities.

I bought my 2003 VW Golf brand new from the dealer for CA$ 30K all-in, and after inflation that's the equivalent of about CA$ 40K nowadays. I'd get a pretty good car with much better tech and safety even for $30K, and could get something relatively fancy for $40K.

In Germany that basket regularly changes contents to keep the official inflation at a politically opportune level. People here still believe that inflation is around 3% - yet the prices have exploded.

This sure sounds like conspiratorial thinking - unless you have any evidence thereof. A quick bit of googling found this: https://www.destatis.de/DE/Themen/Wirtschaft/Preise/Verbrauc... which sure seems to suggest the basket was last changed in 2015 (i.e. this isn't something being fiddled by anybody, let alone on a political whim - it's too slow moving for that). And the actual inflation currently using that system is 4.1-14.3% depending on which of the three baskets you're looking at.

Also, consider that inflation numbers are necessarily lagging reality; they're not updated live by tracking residents or anything like that. For example, september's numbers are available and quoted above, but October's are not (and are projected to be higher).

This kind of conspiratorial thinking is harmful; it reduces trust, and thereby encourages everybody to skimp on the rules making everybody worse off. It's a classic prisoner's dilemma - we're better off just not playing that game. I'm sure the process of inflation-computation is imperfect, but let's talk about concrete, verifiable problems or better yet suggestions for improvements instead of nebulous feelings of disagreement.

By the looks of it, the official statistics confirm that inflation is spiking, but simply not yet to dramatic numbers (i.e. the kind of numbers that instantly change how we all think about money). If you feel that inflation is significantly higher, then why?

The official numbers are around 4.5% to 5% and everyone knows it's a combination of higher energy prices, more taxes (VAT rebate is gone, CO2 tax is up), shortage of materials and reopening of the economy.

Maybe we should start using all that data we are collecting from people’s recurring spending and post time series data points.

If people are ordering the same groceries then we should be able to make our own regional data plots.

We dont need the government for this. They need us to support them. And right now thats just this decade long debate about CPI and inflation, which is now accelerating due to the currency supply shock over the last year as people are converted into paying attention to this discussion.

> calculated by using the price of a standardized basket of things

Doesn't this sort of assume that the needs and wants of society stay consistent over time? I wonder if that is a valid assumption with how fast the world changes these days. For example, smartphones were hardly necessary 10 years ago, but now everyone needs one. And modes of transportation have changed: now we have Uber and a large number of electric cars, which wasn't the case 10 years ago. How could an index that includes things like the price of gas be an accurate measure, if society's needs are constantly in flux?

>How could an index that includes things like the price of gas be an accurate measure, if society's needs are constantly in flux?

The basket can and does get adjusted.

Please note, the price of gas affects the price of Uber rides/

It's so weird anyone would accept this as a measure if the standardized basket changes with time.

It would be weird to accept it if the basket didn’t change over time.

I don’t care what a farrier charges to reshoe a horse or what a block of icebox ice costs, but I might have only 100 years ago. Surely we’d need a way to include entertainment and lifestyle changes as they happen. 1973 CPI didn’t include any costs for personal computers, Internet service, mobile phones, etc.

A meter that would be of different length every time you would measure something would not be useful for measuring. I'm not sure that it would be made better by including your changing lifestyle and entertainment preferences as they happen.

> It's indicative of inflation overall, but every person's personal inflation rate is different […]

For Canadians, StatCan has a "personal inflation" calculator where you can enter your own bills for their own basket of goods and services and get a personal number:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...

The HN crowd in general is upper-middle-class and therefore not really all that price sensitive. If name-brand cereal X doubles in price, HN buys it, logs it in a spreadsheet, then notes that the price went up. Middle-class Joe will look at the price, call BS, and go with an alternative that didn't arbitrarily raise their prices.

I think what's going on here is a lot of profiteering because there's an easy way to raise prices without looking like a villain. More so than ever before, companies, suppliers, and stores can raise their prices arbitrarily, and easily blame the pandemic and "supply chain issues" without a huge amount of consumer blowback, especially from the upper classes.

Hmm. If this were true, we'd see margins expanding in the industry vs prior years, but that isn't reflected in the data.

https://csimarket.com/Industry/industry_Profitability_Ratios...

I think the manufacturers probably have the least leeway; it'd be very easy for shippers or even the grocery stores themselves to just jack up prices where they see fit.

Combine that with large grocery stores getting more data-driven it's kind of a no brainer for them to pick items they know they can increase the price of without blowback

You know, reading all of the replies, some in stark agreement, some essentially calling me ridiculous (no offense taken), I think you've hit the nail on the head.

I've been in the camp of price insensitive - to a degree - I buy things I'm used to and watch prices go up and up and up. Someone who is more savvy and perhaps open minded doesn't see such increases. So we both think each other are crazy when talking about expenditures.

That actually helps me understand both sides - so thanks for putting it plainly.

It's interesting to me to go back and reread all the replies with that mindset. Seems there is much disagreement as to which more accurately represents expenditures.

My wife actually works in the retail analytics industry. They're all buying up data solutions and hiring analysts and data scientists. You bet they have algorithms that spit out "increase the price of kombucha in San Francisco, you'll see your profit margin increase with no downside."

The blowback will not be felt at the grocery stores, it will be felt in the political process. The demand for cereal in a typical American home is not elastic. It will be bought and consumers will collectively distribute their ire elsewhere.

Mom: "whelp, we tried the democrats and now my groceries are outrageous."

Gasoline, rent, shit service...it is not going unnoticed. I quit going to Starbucks because I had to wait a half hour for a simple menu drink every single time, busy or not. I can just stop going there...people can't stop buying cereal and milk, rather they won't and now have elevated expectations of government to control prices and their general well being.

Choosing a substitute is a way to counteract inflation.

I don't experience much inflation. In fact, I don't see any in my budget. I know everyone says prices are getting higher, but we've actually tracked our expenses the last 2-3 years, noting down every little expense in a spreadsheet, and I don't see any signs that prices are rising.

Our supermarket expenses are the same as before, even slightly smaller. Our rent is the same although our landlord legally could have raised it if he wanted to.

All in all, we spend less money than before because:

- we don't commute, - we barely eat out, - we buy less clothes when staying home, - we travel a little less.

The last big purchase we made was a flat screen TV. It costed less than the 10 year old TV it replaced but is so much better.

Electricity and heat have gone up. That's all I see in our budget that has gotten more expensive.

There are purchases we haven't made because they are stupid expensive at the moment: We don't buy shares, we are postponing buying a house, and we have been postponing changing our car. I would have liked to buy a new laptop, but the specs of the new ones look like the 4 year old I have, so it feels wrong.

Could it be that we just have higher prices on some items and assets and that the CPI and mainstream economists are generally correct?

I cannot imagine what you buy that your groceries have not increased in price in the last eighteen months. We too track every expense, and the grocery costs have increased 20-30%.

It's plausible, but not on a medium to large scale. Of all my consumption expenses, certainly coffee has gone up per cup, but everything else is roughly the same.

Oats, deli meat, fruit, pasta, that's about it. Canned beans have gone up a little, maybe butter too.

I have not seen price raises anything like that at grocery stores

For what it's worth, his experience mirrors mine. I don't itemize down to extreme detail, but my wife and I actually do more cooking at home now in the last 1.5 years than we did previously yet our average grocery bill is actually down about $12 a week this year. Honestly, it's kind of shocking.

And before you ask: No, it's not because we switched from buying prepackaged/processed food to raw ingredients. We just order-out less.

Some of it might have to do with the fact that I live in Chicago, a major logistics hub, in a middle class neighborhood that has price-sensitive consumers and multiple major grocery stores.

Last month was the lowest spending month our household has had in nearly five years, for what it’s worth. And that’s with some home renovation (DIY) and a new hobby.

The biggest factor for us is changing what we buy, not prices. Buying less alcohol and fewer pre-packaged foods has made a huge difference in our grocery bill.

Is it possible that on the high end of expensive groceries it hasn’t gone up as much? For instance a 12oz bag of my favorite coffee beans were $20/bag in 2019, they’re still $20/bag…

Going to telework can save loads of money but this is irrelevant to the parent point. Not everyone can do this either. You can’t telework manufacturing or service jobs.

The article is addressing a problem in industries you're admittedly not using much of, so you're probably not feeling what they're talking about.

But you do mention travel and eating out. I think you would find if you tried to do the same amount of travel and eating out that you used to do, you would notice that you're getting less for your money than you used to in lots of little ways.

Counterpoint, we travelled this year and got two flights for the price of one. The refunded flight from early COVID days literally paid for both. Even after somewhat expensive COVID testing costs, still a significant saving.

Sure, now that travel restrictions are causing less uncertainty and demand is ramping up, this might not be repeatable. Perhaps hotels are skimping, not sure as we stayed with family. Either way, there's always some subjectivity in use cases and that can easily tilt the scale one way or the other.

You spending less money on stuff has nothing to do with inflation, though. And your point becomes kinda moot when you intentionally skimp out on things you feel have become too expensive..?

do you eat any meat at all?

I have tracked prices as well, and for me meat has gone 15%-20% up for chicken and pork, and over 30% for red meat.

I was tracking meat in the same places (Trader Joe, and Target) from late 2019 to now.

A normal steak, went from $10-$11/lbs to $15 or more

The cheapest one, went from $7.99 to $10.99/lbs

And file mignon went from $17 to $23-$25/lbs

Regular Chicken brseat went form $3.99 to $4.99/lbs, and organic one went from 4.50-5.0 to $6/lbs

Every day. Chicken, pork, beef etc. We buy it at the butcher though. Don't know if prices at butchers rise less.

Wow, where are you? Chicken breasts can be had for $1.99/lb here. I'm also looking at a grass-fed organic steak at $11.99/lb [1].

We haven't seen the claimed inflation here.

https://www.kroger.com/p/simple-truth-organic-grass-fed-beef...

NYC, Manhattan Perhaps where you are things are cheaper. But I am comparing just my local grocery store and the price increases are very noticeable.

It's not really reasonable to extrapolate from one of the richest, most expensive places in the world. Manhattan has a unique set of circumstances that drive prices there that often do not apply anywhere outside of the NYC metro area.

Small town in Texas here, my experience reflects the New Yorker above. Not the same prices obviously, but the same rate of increase.

“We’ve intentionally avoided purchasing things because they’ve gotten too expensive” sounds like the perfect way to prove exactly the opposite of your point.

I would like to switch to your grocery store immediately.

What makes inflation tricky, both in terms of calculating easily but also in terms of being easily fudged are substitutional products.

Inflation is measured by the price of a representative basket of products. And what’s reasonable to put in that basket today, might not be reasonable tomorrow.

If beef explode in price, people aren’t going to buy steaks, so maybe it makes more sense to change the index away from steaks to pork chops. It’s both a cop-out and the only reasonable thing to do.

The national isn’t poorer just because caviar went from almost free to extremely priced over a century.

What about things that don't really have a replacement like housing, medical insurance, child care costs etc?

Oh, but there is. Move in with roommates in a bad part of the town. See the dentist only to pull out excruciatingly painful rotten teeth. Leave small kids home alone, perhaps pull their older sibling from school to babysit for free.

At least for the European Central Bank, housing is the single largest item in the inflation basket - entered as something called "imputed rent" - how much would it cost to rent an equivalent dwelling. This item alone accounts for 7.5% of the overall index.

Adding housing maintenance, heating, water supply, etc. - the entire housing category climbs up to 17.8%. Which sounds like a totally reasonable estimate to me - young people and urbanites pay more, older folks and people in rural or provincial towns pay much less. From my personal experience - housing and related expenses were ~50% of my income while paying down mortgage, down to ~7% after the loan was repaid

I'm talking about pre 2019 numbers. Housing costs were usually around 3% but remember, you're not spending your entire paycheck on housing. Cheap Asian widgets are going down in price and drag the index down. Expensive housing is dragging the index up and we then end up in some limbo between 1.5% and 2%.

But still, something needs to be said about worse housing/medical treatment/child care vs better chinese widgets. Seems like in the whole quality of life is getting worse for most people and money is actually losing it's value when it comes to the things that actually matter. Or am I not seeing this right?

> Or am I not seeing this right?

The CPI doesn’t reflect your personal preferences. It’s an average across the entire country. Have you ever known the entire country to agree on anything?

To calculate that baskets value, they have to collect market data for all the items in the basket, right?

Wouldn't it be lovely to have a web site under .gov where I can create my basket, and then I see my personal inflation?

Here is the one for Germany: https://www.destatis.de/DE/Service/Statistik-Visualisiert/pe...

Strictly speaking you’d only be able to make a subset basket.

But yes, the basket should be public information.

At least I can’t figure out how to game it meaningfully.

With some work you could do it yourself. The BLS produces price indexes at a fairly low level, and adding your own weights is high school math.

Many industries and businesses do this.

https://www.cbo.gov/publication/44088

Apparently, this exists and it's called CPI-U but alas it still apparently understates inflation.

The Fed massages the inflation rate by throwing out "extreme" deviations.

> Mr. Powell used a gauge from the Dallas Fed that throws out the top 31% and bottom 24% of personal consumption expenditure (PCE) price changes, and was bang on the Fed’s 2% year-over-year target in July, the latest available. An alternative measure from the Cleveland Fed strips out the top and bottom 16% of consumer-price index changes, and was far higher; worse, the monthly rate was unchanged in August from July, giving no support to the idea that inflation is already coming back down. [0]

[0] WSJ: https://archive.md/A7SIh#selection-4683.0-4706.0

> The Fed massages the inflation rate by throwing out "extreme" deviations.

The rationale is valid though. Price-conscious consumers would simply switch brands, stores, or even go for substitute goods if the price of a particular product they chose happened to skyrocket for no reason while the price of all other alternatives barely changed.

It's not valid though. Inflation driven substitution means lower quality. You used to barbecue steaks every weekend. Now you can only afford bologna. You used to wear leather shoes. Now you can only afford plastic crocs. Etc, etc, etc.

> It's not valid though. Inflation driven substitution means lower quality.

It really is valid. Not only is it valid, it's precisely the whole point of tracking a consumer price index. The goal of CPI is to track the prices of goods and services consumed by the population, not brand- or product-loyalty. When prices go significantly up, it's a known fact that consumers react by seeking affordable alternatives, or in the case of luxury items simply going without.

right, so CPI is not a good measure for actual inflation

> right, so CPI is not a good measure for actual inflation

No, quite the opposite in fact. CPI is a accurate measure of inflation as it tracks how much the real-world consumer prices vary where it really matters: real-world consumer expenses.

Perhaps the mistake you're making is assuming wrongly that demand for specific brands/makes/models is perfectly inelastic and consumers do not change their consumption patterns at all even if their price increases so much that they can no longer afford them. Meanwhile, if a low/middle class family sees the price of stake skyrocket, you can bet they'll start to switch a few meals to hamburguers or hotdogs.

The argument is that there is no inflation if people can't afford stuff, because they'll just be priced out and forced to not buy stuff anymore, thus their expenses will be stable. Duh. Inflation is not how much money people spend, inflation is ever increasing prices leading to people affording less and less stuff with their rapidly depreciating money.

If inflation happens and food becomes more expensive and you keep buying the same food you have less money left over for non food products. The CPI will adjust and weight your food expenses more which will raise the CPI much faster than if it also looked at fitness equipment that went down in price because you didn't buy it because food was too expensive.

If food gets more expensive and people don't spend more on food then inflation didn't happen by definition. They still spend the exact same amount after all, they just got different food instead.

By that definition inflation basically never happens until people get higher wages so they have more to spend.

That’s clearly absurd, and so defining inflation in a way that means it never happens when people substitute goods is also clearly absurd.

That is exactly how the ruling class sees the situation. Gallon of milk $10? Chump change, maybe once it hits $100 it will make for a bit of faux concern table chatter at our $10k/seat fundraising dinner next week. The plebes agitating for $15/hour? Catastrophe.

If inflation means measuring value of money over time, substitution is not correct. You could substitute before - you just didnt, because it was not necessary. With a measure you describe we can slide into poverty and it doesnt show.

CPI is a good method to measure inflation, but it's managed by people who have an interest in getting a low number, so it is a poor measure in practice.

If the economists track the price change in 5 brands of spaghetti and report on the median, that would represent people seeking alternatives, for sure.

But if they track the price change in 1 brand of spaghetti, treatment of 1 broken arm, and 1 million-transistor CPU? Those aren't goods that can substitute for one another.

Great, so when prices increase so much people can't afford to buy something there's no inflation with regard to that item. That's handy.

You're right, I suppose the homeless don't experience inflation in housing costs, therefore it doesn't exist!

This is as beautiful as the NSA's redefinition of surveillance whereby they only collect _all_ the data they can. But it's not surveillance until they look at it, which they assuredly don't because there's so much of it.

Further to the point above, when this happens the GDP drops. These metrics need to be looked at in combination with each other, not in isolation. There is no "one metric", its a series of metrics that tell a story.

Toy model: There are 10 goods you buy. They're reasonably substitutable for one another (maybe they're different foods, or types of computer game, or something).

Every year one of these increases in price by 20%. A different one every year, cycling between them all. So every 10 years, they all increase by 20%, an effective inflation rate of about 1.8%.

We have a price index based on a basket of these goods. At the start of year 1, our basket contains equal quantities of all the goods. In year 1, the price of good #1 abruptly goes up 20%, having been stable for the last ten years. OK, we say, this is a thing that's experiencing some sort of anomalous increase in price, so we'll take it out of the basket. At the end of the year, we look at our basket of goods 2..10. The prices haven't increased at all! Zero percent inflation! Splendid.

At the start of year 2, our basket contains equal quantities of goods 2..10. In year 2, the price of good #2 abruptly goes up 20%, having been stable for the last ten years. Another anomalous increase. Better take this one out of the basket too. At the end of the year, we look at our basket of goods 3..10. The prices haven't increased at all! Zero inflation again.

At the start of year 3, our basket contains equal quantities of goods 3..10. In year 3, the price of good #3 abruptly goes up 20%, having been stable for the last ten years. Dang, better take this one out of the basket. Our basket is getting a little short of this kind of good. Hey, good 1 has been stable for a couple of years after its blip in year 1, let's put it back in. At the end of the year, we look at our basket of goods 1,4,..10. The prices haven't increased at all! Zero inflation.

And so we continue. Each year we remove an item that obviously doesn't belong in the basket because it's suffered an anomalous increase in price, so of course consumers will be switching to something else. Sometimes we put back in things that have been stable for a while. Every year we get an inflation figure of zero.

And yet, somehow, ten years after we started all the prices are 20% higher. How on earth did that happen?

Depends on the degree and the duration. If the local slaughter house has to shut down because of Covid and steaks triple in price, does it really make sense to indicate that inflation is ~50% (number made up) over my basket of goods? Or does it make sense to acknowledge that I’ll shift over to chicken or no meat for a few weeks until prices return?

Similarly, if the price of beef permanently puts it out of reach for my family, then I absolutely would call foul on substituting it from my basket of goods. That would be inflation, and excluding beef would be gaming the system.

The problem is that determining between these cases is very hard to do in the moment, and only becomes obvious in hindsight.

Yet it is so far from rigorous which makes it ripe for abuse. The "extreme" deviations are defined arbitrarily, evidenced by the fact that different offices of the Fed come up with different inflation numbers. Hence the chairman can choose one which is conveniently on target.

The government changes their reporting mechanism all the time. If you use the 90s standards it is closer to 10% (15% using the 80s standard).

http://www.shadowstats.com/alternate_data/inflation-charts

This is occasionally mentioned in the news:

https://www.cnbc.com/id/42551209

I'd love to learn more about this, if you have sources.

Because this sounds like exactly what's happening.

How to Own the World by Andrew Craig explains this in the inflation chapter.

This chart isn't remotely plausible. No legitimate difference in reporting mechanisms or standards would exactly match every upswing and downswing - if you're weighing the basket differently, you'll get spikes at different times. They have to be just making up a constant value and adding it to the official statistics. (You'll note that the reporter in the linked article didn't ask anyone other than the people who made the graph whether it made sense.)

The criticism I’ve read of ShadowStats is that they don’t actually recompute inflation using different methodology—they just add a constant of their own choosing to all the official inflation figures.

What's it like falling for literally fake news? If those charts don't set off your bullshit detector... Well... You should probably stop trusting yourself on many things.

Tell that story to the government bond markets. The investors would love to hear those numbers and instantly demand 10% interest...

No, I'm serious. If these numbers were accurate then you wouldn't even be able to make money off the stock or housing market. Everyone would be losing money.

> http://www.shadowstats.com/alternate_data/inflation-charts

The irony of ShadowStats:

> So, here we are 3 years later and the price for a Shadow Stats subscription still hasn’t budged! At $175 for a year long subscription, you still get the same Shadow Stats. The cost of the subscription has remained the same even as inflation has moved higher. So, in real terms, there’s actually been deflation in the cost of a Shadow Stats subscription.

* https://www.pragcap.com/update-theres-still-deflation-in-hyp...

That was written in 2014. It's now (late) 2021 and and the price is still $175. :)

Here's an interesting experiment I recommend for anyone believing ShadowStats as anything but nonsense. You can prove it yourself quite easily.

1. Take ShadowStasts claimed inflation (dig, you'll find their historical graph), which they generally have much higher than BLS rates, and take BLS rates, and compute the compounded inflation over say 20-30 years.

2. Pick a decent batch of things you buy: housing, rent, food, gas, cars, etc. (making your basket of goods - scale according to what you spend on them, like a normal basket of goods would do)

3. Find ads from now and from the start of the timeframe. Gather prices. Put in Excel or Google Docs

4. See which is more accurate: BLS or ShadowStats.

5. Conclude ShadowStats is absolute nonsense, and ban it from your thinking, since you just proved to yourself it is nonsense. Reading it makes one significantly less connected to demonstrable reality.

The first time I did this it was amazing how far ShadowStats was from reality. I've been recommending this to friends for years - most realized what nonsense it is and learned to see if there's simple ways to check things themselves. And this is an easy test anyone can do with a little effort.

ShadowStats writes for a specific audience: people who distrust official statistics in general, and inflation statistics in particular. As you can see in this thread (and likely also by talking to most people you know personally), this is a sizable group, so it's likely a pretty good, sustainable business, just like health/diet fads or self-help books. The story does fall apart under scrutiny, but the susceptible audience is replenished faster than the claims can be debunked.

Amusingly, highly educated people who are disdainful of anti-vaxers or Gwyneth Paltrow quackery can easily believe that inflation is an order of magnitude higher than officially reported, or that they the evil/incompetent bureaucrats leave out food, shelter, healthcare and/or energy costs from the calculation or some such.

As an academic economist turned machine learning/SWE, I'd say there are plenty of knowledgeable people around on HN, but on matters of economics and health, the signal-to-noise is definitely much lower than on anything related to computers.

Agreed. It's why over the years I've come up with experiments like the above that I can give to capable yet deluded people to check things on their own. It amazes me how many otherwise smart people eat the huge amount of crappy, conspiratorial economic nonsense widespread on many forums, including unfortunately a lot of HN and Reddit threads.

It's why I love such clean examples as the Shadowstats nonsense. It's completely debunkable in an hours work.

I guess I’d be the outlier in your friend group. I haven’t noticed a significant change in our regular grocery bills. Optional purchases by and far dominate, and the biggest factor for our grocery bill is whether or not we bought alcohol, not the change in meat prices.

Aside from rent, the only things I’ve noticed significant price changes in have been items undergoing acute supply shocks, such as lumber. And most of those have calmed down since mid last year.

I'd agree with your assessment.

Customer price index is based on average consumer behavior. The tricky thing is that consumer behavior changes when prices rise. For example, when the price of meat rises, consumers start substituting it with cheaper alternatives. If the old basket was $50 and the new one is $50, then there's no inflation.

Saifedean Ammous writes about this in his new book, the Fiat Standard. The chapter about fiat food is available online. [0]

[0] https://saifedean.com/fiatfood/

> I'm older, so I have 'habits' that don't tend to change.

> So what is the government reporting?

In addition to CPI, the government also reports CPI-E for elderly consumers. It is generally higher than the more widely used standard CPI (all urban residents).

https://www.bls.gov/opub/ted/2012/ted_20120302.htm

> So what is the government reporting?

They report things that make them look better. Generally that makes inflation look lower than it is.

For what it's worth, I'm fairly young but I have similar issues to yours. If you mostly buy essentials, the costs have been rising very fast, much faster than salaries do for the same functions.

20% over a year or a decade? If it is the former, what has the average annual inflation been over the past, let's say 30 years, in your opinion?

Year.

I think inflation was pretty steady up until about 2019. Then it went insane.

If I had to pick an average, 3 or 4% until aforementioned year.

You live in a different part of the country than almost anyone else. The goods you buy, even in your area, can vary significantly. If you're trying to buy a gallon of milk, things aren't so different. A car, yeah that's gotten pricey. But your anecdotal experience is no reason to doubt the statistics on what is happening broadly.

It used to be a slow creep you noticed, but kind of grumbled at...

In the last 2 years it's _noticeable_ and painful.

Doesn’t the most often used form cpi exclude food and housing?

I’ve always disliked this, but shocks to those markets keep them excluded.

It includes food and housing/shelter.

But it's important to distinguish between a house and housing.

A house is a capital good that provides housing/shelter. So if the prices of houses got really expensive but rent stayed the same that wouldn't show up as inflation.

> Doesn’t the most often used form cpi exclude food and housing?

No, it doesn't. In the US, the US Bureau of Labor Statistics explicitly includes food and rent in it's CPI.

https://www.bls.gov/cpi/overview.htm

100% this but the macroeconomics of it are simple, by pushing low interest housing and food goes up astronomically so the economy ends up with the backbone of the labor force (>$20/hr) being priced out of everything.

The only fast solution here is subsidizing living which many governments are doing but it won't fix the problem they created in the first place and now they have to deal with either dramatically raising rates and saddling the people with horrendous debt due to bond yields and defaulting, etc or riding it out and lying about real inflation with small raises.

I agree low interest rates inflate housing prices, but I don't think that has much to do with food prices.

I think food prices are being inflated simply by more people having more money to spend (pandemic unemployment/stimulus, higher wages for some).

You think people are buying more food?

No, food providers can extract higher prices for food.

This makes me wonder about competition. Theoretically if there's competition, one food provider could offer food for the old price, or halfway in between and attract all the consumers and make extra money from the additional business.

Food availability is also suffering. I haven't been able to find wings at a Zaxby's in months. Many places have switched to lower quality ingredients, like Wendy's switching their buns and chicken breasts.

Because more people can afford to buy them...

That's not at all the cause. It's because our supply chains and logistic networks are very tight for maximum profit and efficiency. Any disruption, like 500,000 people dieing unexpectedly, trucks being diverted to carry medical supplies or toilet paper and any overseas part delivery delays cause large ripple effects. Millions, if not billions of broiler chickens were disposed of over the last year because they couldn't get delivered or processed. Similar situations are happening all over, we are getting fewer and fewer trucks on the road each week due to routine mechanical issues that can't be fixed because the parts aren't available.

The logistics problem is continuing to spiral, ships backed up are now not returning on time so factories are backed up and forced to shutdown production.

People not in production and logistics are severely underestimating how bad this is going to be. This is the beginning of the shortages.

I think food prices are going up as a combination of three factors:

1) PRIMARY factor. The rent is too damned high. It has been and people have been cramming together like sardines; but just like the car rush as PPE bubbles, now people want all the housing everywhere even MORE than the last 30-50 years when it wasn't being built sufficiently to accommodate demand by jobs.

2) The lowest end workers finally got enough of a lifeline, even if only for a short time, to realize how badly they were underpaid and how much they need to really have a modestly OK life. Combine with all the services that let them work in the first place (care for children, like daycare and schools) unable to provide due to the pandemic and this is hard-stalled between less workers and workers who hold out for more in what is finally a sellers market.

3) I don't have first hand observational data on this, but my gut feeling is that it's harder for businesses that used to do under the table work with citizens / undocumented immigrants to fully staff, and all the more likely for the pandemic to harm tightly packed workers in processing places. It would be nice to hear more about documented guest worker programs that legitimize migrant worker practices, while also ensuring that they're paid enough to discourage undercutting the local job market.

I'll also note: Rent affects the businesses too... and food prices might go up based on their (mistaken) belief that consumers can afford to pay more. I have cut back to lower quality options and rarer treats for some options in the last half year as prices have risen past the points I'm willing to buy at.

Your personal CPI can go up disproportionately to the country at large. Anyone living in a city center will experience this as cities gentrify.

Understood. But do you know any single person that will say 'my groceries only went up by a few cents'?

I do not, hence my problem with the reporting.

I would say that, for one. Recurring orders and receipt scanning make these kinds of comparisons pretty easy for me.

For what is worth, my personal anecdote is different: my rent went slightly down (renewed in August, in Boston) and my grocery bill has not moved in a noticeable way (middle class vegetarian with Mediterranean tastes).

Also keep in mind that groceries, or rather food in general, only comprise in the neighborhood of 10% of the average household budget. So if we're just talking about food, if you're paying 50% more, that is just a 5% increase in your overall expenses.

And as far as your rent going up by 30%, that's offset by some people whose rent actually went down by a lot during the early pandemic when people were fleeing the cities and bargains were to be had. And some people who don't pay rent at all, but pay fixed-rate mortgages which will go up by zero percent over the life of the loan. So you can see how that could significantly nerf the total inflation affecting that household.

I live in lansing and I’ve not noticed groceries getting more expensive in the past few years

My groceries haven't gone up.

If your issue with the reporting of a statistic is that your personal anecdote disagrees with it, then you should probably look for more evidence.

I live in Switzerland and a few cents seems accurate. A lot of the current increase I see is based on the bad summer harvest tho and less external factors.

Either it's a Swiss thing, or because we buy the majority of food semi-directly of organic farmers and prices haven't changed that much in this sector.

CPI(~5%) is a go-to measurement because it attempts to avoid geo-politics. However, has a blind spot for the very fundamentals of inflation.

PPI(~10%) is a late stage measurement that doesn't avoid geopolitics. However, because of government policies it's said to have become useless. Yet still considered better than cpi.

Oil as a measure. When geopolitics are screwing with it, everyone knows. It's under immense abuse right now. Yet it's recent low because of covid was ~$20/barrel and it's up to ~$83. Or if you account for covid, it's up ~30%.

M2 money supply? It's got 40% inflation locked in, but that wont show up in a single year.

Call me crazy but PPI seems on the money. Geopolitics seems to be the biggest player in the game right now.

My rent, as did most rents in my area went down. I expect next year will be a modest increase, certainly less than other increases in the recent past. While goods are clearly more expensive, it doesn’t feel anywhere close to 20% more.

Your rent has gone up 30% in a year? Most places in the US have laws which limit yearly rent increases to the low single digits.

>Most places in the US have laws which limit yearly rent increases to the low single digits.

Even if that were true, how does that knowledge help? Legal fights of that nature take resources and time, which most people don't have.

Most other countries have tennancy boards and things so you can enforce your rights without expensive lawsuits. Does usa not have that?

Having lived in multiple (mostly first world countries) I have never experienced this outside of the state free / subsidised housing sector.

Maybe its not as common as i thought. Here's an example in canada https://en.wikipedia.org/wiki/Tribunal_administratif_du_loge... . Several, but not all provinces in Canada have similar administrative tribunals instead of the normal court system to resolve resedential rental disputes.

https://www.commerce.wa.gov.au/consumer-protection/housing-a...

Department of Commerce/Consumer protection in Australia.

They'll give basic advice and you can attend a Magistrates court for more difficult issues for a nominal fee.

The effective purpose of CPI is to be the rationale for credit and monetary expansion. Without that, the housing and stock markets would be left to drift freely.

The exact mechanisms behind something like CPI are probably secret to prevent manipulation by outsiders, but I also suspect it's difficult to even confirm that.

Nonsense. The BLS is completely transparent about the exact mechanisms behind the CPI.

https://www.bls.gov/cpi/methods-overview.htm

They're transparent about the mechanisms in general, but plenty of the mechanisms are arbitrary by nature. The article discusses hedonic adjustment for instance. That isn't a scientific or mathematical change. That's people at the fed making personal judgement calls about how good the iphone 12 is vs the iphone 11, and adjusting the price increases on the basis of that personal judgement call.

If you open the link you shared, you can see they make hedonic adjustments for men's suits, the first item in the list. Are suits today really much higher quality than they were 10 years ago, necessitating a decrease in the actual price inflation of a man's suit? The fed thinks so, but they don't share the details of why or how much hedonic adjustment men's suits deserve.

You're over simplifying it. The hedonic adjustments involve very little personal judgment.

https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...

The published numbers are opaque. There is no way of confirming what mechanisms are used since the data is secret. See the paragraphs on data confidentiality.

At least in Canada, renters get hit hard, but homeowners are actually bringing CPI down with lower mortgage rates.

> So what is the government reporting?

The government tries to guess which prices ratchet only up (e.g. new cars) and which prices rise and fall (e.g. gasoline). They then report the inflation rate on the ratcheting goods only, because that should be more predictive of what's going to happen in the future.

> So what is the government reporting?

BLS: Sep 2020- Sep 2021, all items : up 5.4%

[https://www.bls.gov/news.release/cpi.t01.htm]

On that chart, fossil fuels are much higher up.

Looks like 2022 social agency dispersals will be up about nearly 6%.

The CPI has been questionable for a very long time, especially since the price of real estate went insane in the 2000s.

> especially since the price of real estate went insane in the 2000s.

And the monthly cost of mortgages went down over the 2000s:

* https://awealthofcommonsense.com/2021/03/what-if-housing-pri...

The price of real estate isn't included in the CPI, nor should it be. Purchasing real estate is an investment, not a consumer expenditure. The CPI does include rent and owner's imputed rent.

> Purchasing real estate is an investment, not a consumer expenditure.

Yeah I remember when I was living under a bridge and then decided to invest in Real Estate.

Renters have a greatly impaired ability to build wealth. If everyone has to rent except "investors" then there is no more middle class. In a market that is majority renters landlords can raise rent until it consumes virtually all surplus:

https://en.wikipedia.org/wiki/Law_of_rent

The CPI is correct as the CPI is defined, but that's circular. I can index inflation to the number of nose hairs in the President's nose if I want. The question is whether it's a meaningful statistic for driving a policy that benefits anyone except the government or the financial industry.

The CPI should include the cost per square foot of residential real estate. It should also be weighted heavily toward necessities like food, energy, education, and health care, which perhaps coincidentally are hard to outsource and therefore are more directly influenced by domestic inflation.

Nonsense. That's like claiming the CPI should include the price of gold bars or mutual fund shares. You completely missed the point of the CPI. It has nothing to do with building wealth.

CPI is heavily weighted toward necessities like food, energy, education, and health care. You would know that if you bothered to read the documentation.

https://www.bls.gov/cpi/methods-overview.htm

> The CPI should include the cost per square foot of residential real estate.

Other websites follow that [0] and interestingly enough, median inflation adjusted price per square foot across the entire country hasn't really budged in decades although covid could have messed that up these pasts 2 years. Of course, if you want to live in a geography constrained location like the west coast and northeast, that does not really help you but you need to work with their local governments as that is a local problem and not a federal one.

[0]: https://www.supermoney.com/inflation-adjusted-home-prices/

If the purpose of buying real estate is to build wealth, then it is, by definition, an investment. If the purpose is to provide shelter, it is not.

In practice, people buy houses both as an investment and a shelter. So the CPI attempts to ignore the portion of the purpose that functions as an investment.

> Renters have a greatly impaired ability to build wealth

Really, in the era of fractional shares and low/no-cost brokerages? Renters can build wealth by purchasing assets, just like anyone else.

I'm not an economist also, but I wonder does this have something to do withQE? US almost double the QE in 2020.

When did your rent go up, and when did your goods cost $100.

You would think that there could be alternative geographical price indices created with help from companies that aggregate this data regularly (grocery apps, travel apps, etc).

What I think is that it's completely a lie to misinform American consumers to not freak out.

A 1lb ribeye steak in 2017 was about 11 dollars. Today it's 17 dollars, in bulk.

If you want to look at 'cheap' things, just look at the printed price of Santitas chips.

$11 -> $17 in 4-5 years is ~9%/year. High, but not 20%, like the parent post claims.

CPI actually claims meat and poultry inflation is 10.5% (https://www.bls.gov/cpi/, click Food -> Food at home -> Meat and poultry), so that's not far off eitherr.

I don't think there's any lying going on. It's just that not everything is inflating at 10.5%, and the CPI is just one number describing the whole economy, and you probably mostly notice the things inflating the fastest.

ribeye is not the cut that most people are buying. In a supply chain challenged environment with rising wages, premium cuts of beef are seeing price increases, but this is not evidence of outsized inflation. Also, if you want delicious beef, there are lots of other options both in cuts and preparations.

I do understand this point, but am trying to be honest as a consumer. My family has only ever really liked ribeyes. If they've doubled in price, that affects us. That say, stew meat or london broil didn't doesn't affect our bottom line.

You've stated the point well: there are substitute beef products that haven't seen the same price increases. This is not the same as me general inflation, or nearly as concerning.

The level of luxury people get acclimated to is pretty amazing. I'm trying to imagine the response I'd have received if as a child I had demanded ribeye regularly, or what my grandparents would have said if they heard it discussed in such a manner today, as a product deserved at a cheap price (I gather your family can still afford it.)

I think you might be getting to the core of the reason these replies have gotten so crazy. Measures like CPI are meant to estimate the expenses of a typical middle-class family. HN is full of people who fancy themselves typical middle-class, but in fact are not.

So higher inflation in premium goods is seen as a crisis. Notwithstanding how fast we'd cook the planet if everyone demanded ribeye every week...

> My family has only ever really liked ribeyes. If they've doubled in price, that affects us.

A particular consumer's habit of consuming very specific high-end goods or services which is immune to substitute goods is not how inflation is determined. It would make as much sense as claiming inflation skyrocketed because you only wear Air Jordans and the latest model is sold for around $200 while last year they sold for $120.

> My family has only ever really liked ribeyes. If they've doubled in price, that affects us.

With all due respect, is it lost on you how utterly ridiculous this statement is?

It's not a ridiculous statement if everyone is saying their particular favourite product has gone up in price significantly more than inflation, as the original post (https://news.ycombinator.com/item?id=29063208) in this thread does.

If all the products have increased in price then inflation is higher than reported.

You’ve chosen the one thing that has risen in price the most…steak. Why do you think you’ve done that, and is ribeye steak a very necessary part of your diet?

The BLS does have regional CPI numbers. Here's their page for SF:

https://www.bls.gov/regions/west/news-release/consumerpricei...

Note that the CPI in the SF bay area has been >2% for over a decade and has been 3-4% since 2016.[1] This is noticeably higher than the national rate of <2%.[2] Until 2020, that is, when CPI dropped in the SF bay area but skyrocketed nationwide.

[1] https://data.bls.gov/timeseries/CUURS49BSA0&output_view=pct_... [2] https://www.bls.gov/charts/consumer-price-index/consumer-pri...

Yeah, I am concerned with the methodology more than the reporting.

> 11. How are CPI prices collected and reviewed? BLS data collectors visit (in person or on the web) or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. We record the prices of about 80,000 items each month, representing a scientifically selected sample of the prices paid by consumers for goods and services purchased.[1]

> The CPI survey collects about 94,000 prices per month to compute indexes for commodities and services. Approximately two-thirds of price collection in the CPI is done by personal visits of CPI data collectors to brick-and-mortar stores. The remaining data are collected by telephone or on the outlet’s website. In some cases, these data are supplemented by data provided from other sources. The outlets where prices are collected are selected based on data from the CE survey. These outlets may be brick-and-mortar stores or websites (e-commerce); currently, about 8 percent of CPI quotes are collected from outlet websites.[2]

This seems easily biased and inefficient when considering theoretical alternatives.

1. https://www.bls.gov/cpi/questions-and-answers.htm#Question_1...

2. https://www.bls.gov/opub/hom/cpi/data.htm

> This seems easily biased and inefficient when considering theoretical alternatives.

What possibly leads you to believe that aggregating the price of 80k items from different markets is something that can be easily biased?

https://economics.mit.edu/files/5408

It would probably be more helpful if you could summarise your thoughts on the linked article here.

30% since 2019?

Same experience from friends all over the world. From fuel to core essentials its running at 20 to 25%.

If we talk US current official status is:

----------------------------------

"In July 2021, the Consumer Price Index increased 0.5% from June to July, slower than the 0.9% month-over-month increase from May. When compared to the year prior, the full index increased 5.4%, making it the largest 12-month increase since 2008."

----------------------------------

"Consumer Price Index (CPI)"

https://www.investopedia.com/terms/c/consumerpriceindex.asp

CPI stat from the U.S. Bureau of Labor Statistics:

https://www.bls.gov/charts/consumer-price-index/consumer-pri...

"Consumer Price Index Frequently Asked Questions"

https://www.bls.gov/cpi/questions-and-answers.htm

"How is the CPI calculated?"

"The CPI is a product of a series of interrelated samples. First, using data from the U.S. Census we select the urban areas from which data on prices are collected. Next, another sample (of about 14,500 families each year) serves as the basis for a Telephone Point-of-Purchase Survey (TPOPS) that identifies the places where households purchase various types of goods and services, forming the basis for the CPI outlet sample. Using data from the Consumer Expenditure Survey, BLS statisticians assign quotes in the CPI item categories to specific outlets. A specific item is then chosen for selection using a process which bases the probability of selection for an item on the share the item composes within the outlet’s revenue in that item category."

"Recorded price changes are weighted by the importance of the item in the spending patterns of the appropriate population group. The combination of carefully selected geographic areas, retail establishments, commodities and services, and associated weight, gives a weighted measurement of price change for all items in all outlets, in all areas priced for the CPI."

There is also the PCE running at almost 5%:

https://www.bea.gov/data/personal-consumption-expenditures-p...

"Personal Consumption Expenditures Price Index"

"CPI vs. PCE Inflation: Choosing a Standard Measure"

https://www.stlouisfed.org/publications/regional-economist/j...

"Two different price indexes are popular for measuring inflation: the consumer price index (CPI) from the Bureau of Labor Statistics and the personal consumption expenditures price index (PCE) from the Bureau of Economic Analysis. Each of these is constructed for different groups of goods and services, most notably a headline (or overall) measure and a core (which excludes food and energy prices) measure. Which one gives us the actual rate of inflation that consumers face?"

> For someone like my family, I wouldn't believe any number less than 20%.

For that to be true, on average the price of every single item in your groceries list has to increase over 20%.

Can you provide a single example of an item in your groceries list whose price increased over 20% during 2021? And which item increased in price the most?

I'm not claiming I agree, but for me (a) gasoline went from $4 a gallon to $5 today (b) ground beef went from about $6 to $8 a pound last market trip.

I wouldn't be surprised if supply chain issues (e.g., with trucking companies) are partly responsible for the price rises.

Where do you live that gas is $5/gal and ground beef is $8/pound? The national average price of gas is $3.40/gal and ground beef is $4.50/pound.

gas was 5.05 in the bay area today. not sure what the price of ground beef is but my steaks i buy went from $20 to $25 over the last year and they're worse quality

The Bay Area is one of the richest areas in the country. It's not reasonable to extrapolate pricing trends from there to the rest of the country.

I live in a fairly HCOL area in a state with some of the highest gas taxes (California). Gas is $4.19/gal* and ground beef is $6/pound. So my guess is that they're in the Bay Area OR just shopping at very expensive places

*Here in Los Angeles there's a handful of gas stations that inexplicably charge $1-$2 more than any other one. I always assume it's either money laundering or they just prey on people who aren't paying attention. $4.19 is just the cheapest price I've driven by in the last 24 hours

Yikes, is this the US? Just a reminder that things like this are incredibly regional based. I still pay $1.79/lb for chicken breast and 3.50 for 80/20 ground beef in Richmond Virginia.

And gas goes up and down for a variety of reasons.

Speaking of region, $5 a gallon of gas is _still_ incredibly cheap next to our euro brethren.

Is it really fair to use gasoline as an inflation marker? Geopolitics cause the price of gas to fluculate wildly.

True, but it affects people both directly and indirectly since the majority of goods is still shipped with trucks. So, IMHO, it makes sense to use it as AN inflation marker, but not the only one.

And local trends vary a ton. You can find gas that’s $1 cheaper or more expensive just by shopping around.

Right, but you're specifically referring to energy price inflation - and a quick bit of googling find widespread (and mostly worldwide) agreement that energy prices are spiking faster than other prices. But energy, while crucially important because of knock-on effects, simply isn't a dominating factor directly in most peoples expenditures.

Now, you could reasonably make the case that we should therefore expect future non-energy inflation to follow since energy is a cost in pretty much every step along the supply chain. And that's fair! ...but it's not a sign the official figures are fudged either; after all, it takes time to collect figures, and it takes time for retailers and everyone along the supply chain to update their prices. Given an energy price spike, it's totally normal to see the energy price inflation spike a short time (1-2 months?) later when the figures are next updated, and then see goods inflation spike (less highly) a month or two after that. If everything aligns perfectly and businesses and data collectors act quickly, maybe a little more quickly - but never immediately.

So we should expect to see e.g. gas prices rise first, and then other goods, all while not yet immediately being represented in official figures.

If, after a few months, a perceived price spike wasn't captured by the official figures, then it's time to start worrying - and even then, not every worry turns out to be founded.

Maybe shop somewhere other than Whole Foods and Premium Gas R Us

The high gasoline prices in California are due more to state government policies that have artificially restricted supply. The state requires a special blend that's not really used anywhere else, and they don't allow construction of new refineries.

> The high gasoline prices in California are due more to state government policies that have artificially restricted supply.

To the extent that's true (and its a rather including incomplete story) as an intermediate cause, those policies themselves exist to meet federal pollution mandates, which California has, and even moreso in the last had, particular population and geography challenges with, particularly in the LA basin.

If you think inflation was 20% over the past year, that's equivalent to saying someone's salary going from $100k to $119k in a year has resulted in them being poorer. That just doesn't pass the common sense test, IMO.

You'd actually need to make more like 125k to maintain a 100k standard of living through a 20% inflation event since you're taxed on the "extra" income.

There is an obvious problem with fixed salary work contracts since the death of unions and bargaining power but come on. Everyone knows you're supposed to switch jobs to get more money by now. It's what the employers implicitly have agreed upon.

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