US consumer prices soared 7% in past year, most since 1982
apnews.com
apnews.com
Or maybe printing 40% more dollars is the main driver here? This feels like a very dishonest take.
There is also a big labor shortage. If you're in the U.S a lot of your basket is coming from California. In 2020 H2A visa holders (farm workers) were payed $14.77/hr. In 2022 its $17.51/hr
What happens when you can't even get the Visas? You start approaching American locals, who want much more per hour than a Visa holder. They actually want a living wage
This whole labor shortage +inflation thing to me just means - people are figuring out how much it actually costs to make what you consume, when employees aren't treated like garbage
edit: My bill went from ~$600 to ~$650 using a 4 month window rolling average.
Personally I have noticed I now alter the foods I choose to buy because of the high prices. I am buying more staples and trying to cut costs because the price of seemingly everything besides dairy and chicken(when you can find wings that is) has gone up.
I expect this disruption is driving a lot of the spike in grocery prices.
What the heck are you talking about? I've seen heavy cream in literally every grocery store I've gone into. Supply chains for food are not screwed there.
New Seasons was better, so maybe just an Amazon thing. But that’s at least one screwed up supply chain
>In October, a cyberattack against the largest US cheese manufacturer contributed to a nationwide cream cheese shortage shortly before the holidays, Bloomberg News reported, endangering holiday treats for millions. Bloomberg reported the attack targeted plants and distribution centers. As a result, Wisconsin-based Schreiber Foods was unable to fully operate for several days — just as it was heading into its peak busy period before the Thanksgiving, Hanukkah and Christmas holidays. The company is one of the country's largest marketers for dairy products, including cheese slices, yogurt and the all-important cream cheese, with annual sales of more than $5 billion.
https://www.cnn.com/2021/12/18/business/cream-cheese-cyberat...
https://www.nytimes.com/2021/12/27/business/beef-prices-catt...
In this example the price paid to ranchers for beef hasn't risen all that much but the end user price has increased drastically. That the meat processing industry has 4? companies controlling 80+% doesn't help.
I don't know, but it seems like farmers negotiate contracts in advance, so if futures prices are driven up by speculators using easy money then there will be a period of time where farmers are selling for less than they otherwise could because they negotiated futures contracts. Isn't the whole point of the futures market to provide farmers with stable prices, not optimal prices?
Massive widespread crop failure. https://www.bakingbusiness.com/articles/54799-usda-confirms-...
I've heard this take before, and it's not wrong that a few sectors are driving it, but it's not super relevant imo.
I run a business. For years I held off on price increases (or kept them to a minimum) because my competitors and vendors weren't raising theirs and the labor market wasn't insanely competitive.
Now, all my vendors are raising prices, all my competitors are raising prices, and all my employees can easily command big raises due to the power they wield in the job market, so I'm raising mine. And all my clients are raising their prices for the exact same reason as me, so I don't have to worry about losing them as clients, I know they can absorb my costs.
This is the viscous-cycle of inflation as it's actually experienced.
Now, that being said, we agree that the "corporate greed" storyline is lame. You see this also in places like Reddit r/antiwork where all companies and bosses are perceived as greedy, malicious labor exploiters. I just feel that behavioral economics is more a cause here than the money-supply forces you're describing.
It does seem kind of disingenuous to blame inflation on a something we've been doing for over a decade rather than the major black-swan event that happened two years ago. Especially since pandemic inflation was nearly instant: lockdowns -> shortages -> price gouging.
That said, you did see asset prices reach questionable levels even before COVID. I pulled most of my money out of the market in late 2019 for that exact reason. I was convinced we were due for a correction then.
This is new. Somehow stimulus/asset inflation is causing this (lower labour market participation).
Are you aware of the degree to which is ramped up?
The better graph to look at is the money base. https://fred.stlouisfed.org/series/BOGMBASE
No one's ignoring the last 13 years of furious money printing. What you point out is the exact problem with money printing. When you dump a ton of new money into an economy everything seems fine for a while, until it doesn't. It's kind of like Wily Coyote running off the cliff. Everything is fine at first, but at some point he notices that there's no ground under his feet anymore.
It's only when you slow down or reverse the printing can the inflation 'catch-up' and over-whelm, and the more you slow the higher the wave will be, and the longer you've been printing the more volume the wave will be.
The best way to avoid inflation is to only print currency equal to actual productivity increases, the second best way is to continue to print more and more - if you ever let up you'll run into the other end of the cycle. As the second option produces wealth inequality that centralizes decision making and drains efficiency from the market-economy, we should try the former again.
If the wealthy know that the Fed is going to raise rates, and the wealthy know that raising rates will trigger a recession, and the wealthy know that a recession will result is lower asset values, then they will, before this all goes down, start to hoard currency and consumption items that last for ~3 years. Why are used cars prices so high? Used cars will last throughout this recession. The wealthy are already hedging this exact scenario.
Hedging that we are at the end of the cycle creates inflation in the hedged items, and the Fed think that raising rates will slow down inflation, when the only thing that slows inflation is the job loss that comes when they have risen rates to much. In fact, by raising rates they will only invite more inflation, as it will cause the wealthy to hedge ever more.
[1] https://tradingeconomics.com/united-states/money-supply-m1
The other misconception I often see is that if prices aren't increasing, then that means inflation is not occurring. Inflation in the sense that money is losing purchasing power, is always happening. It often doesn't perfectly reflect in consumer prices because business are hopefully becoming more efficient at some rate.
Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.
Now look at the M2, which didn’t change.
Exactly. This article is about consumer prices, and yet this discussion became about inflation. Even I conflated the two. I should have said "perceived inflation" or just "prices". Regardless, we're saying the same thing. As I illustrated with my own example from my business, I'm raising prices right now because:
1. I need to: all my vendors are raising their prices and I need to pay my employees more.
2. I am able to do so without consequences. My clients are all raising their prices too, in order to cover rising costs from their vendors (including me) and employees.
I'm perfectly willing to concede that inflation's always been happening (I'm not much of an economist) but that it took COVID to bring about a chain reaction of price increases that ordinary folks experience as "inflation".
How is money losing purchasing power if prices aren't changing? If prices aren't changing, then money will buy what it bought before. Isn't that exactly "purchasing power"?
Inflation is an increase in price level. Who sets the prices? Corporations (or landlords). They may increase the prices either because their inputs are more expensive, or to pad their profits. But all the inputs, in the end, derive from someone's labor. There might genuinely be situations when more labor is required to achieve the same output (e.g. drought for agriculture, or mineral extraction got more difficult), but most of the time, the opposite is true - less labor is required to achieve the same output. If wages do not rise at the same pace as prices, somebody is pocketing that extra money
But we never see that inconvenient fact being mentioned...anywhere. Newspapers run headlines like "beef prices up X%", without the corollary - "and the price increase is pocketed by meat packing plant cartel". And it turns out, empirically, that's pretty much what's happening: Corporate profits drive 60% of inflation increases:
https://mattstoller.substack.com/p/corporate-profits-drive-6...
When only the rich guys got free moneys and "invested" it into stocks and buybacks, it didn't make any sense to raise prices.
Now that the little guys (potentially) have money in their greedy little hands, it is time to raise prices. You can't have ordinary people with money to save, right?
There are expectations built into economy all around. Once enough people expect that the money printing will continue and increase, the change in collective behavior may be fairly sudden.
But yes, inflating the USD is the elephant in the room. I am not surprised either.
Why? Because, whether one agrees with the economic decisions of the last 2 years, we have fiat currency for a reason. The whole point of being able to stretch the dollar, or not having the dollar be based on anything tangible, is so that all holders of USD are effectively taxable.
That being true, is anyone from the IMF to the Federal Reserve to the US Treasury and Congress going to be upfront about the implicit taxability of the dollar? Most Americans are completely oblivious to this; although even Gen Z and Alpha are privy to price increases, most people don't conceptualize inflation as a devaluing of the dollar itself, but rather as the increase of prices of items in isolation. They don't realize that these price increases are effectively planned and that they occur to the benefit of someone else, as opposed to being the result of some force of nature or incompetence of leadership. Even those who have a sense that they are being robbed might not put two and two together, in part because of articles like these that blame easy things, like corporate fat cats or, worse, the people themselves buying "too much" at the behest of the advertising industry.
If mainstream economists and politicians came out and openly said that inflation is a tax and that they're just going to keep printing more currency when they feel like it and keep raising the debt ceiling, the narrative would collapse because too many people would gradually lose faith in the system. The Soviet Union still appeared more powerful than it really was for many years, but the true reason it came crashing down was that the Russian people lost faith in it. You can keep a failing system going indefinitely if everyone believes in it and plays along with the game of charades. If people stop playing the game, all of a sudden it's apparent that everything they valued was imaginary all along.
So yeah, expect more rhetorical gymnastics from DC. The incentive structure is not there to have them speak otherwise.
Yep.
"Power resides where men believe it resides. It's a trick..." -- Varys from Game Of Thrones.
Yes. It would have been a very different conversation if the fed was taking 40% of all checking/saving account cash. Which is technically not different in term of transfer of wealth.
1) Increased leverage of labor to increase salary raises prices.
2) Increased money printing has increased demand faster than production can respond, raising prices.
3) Lack of aggressive anti-trust prosecution has led to effective monopolies. This was recently reported in the meat industry, buts it's everywhere
4) pandemic related disruptions have impacted the supply chain.
Now, depending on your political leanings pick one of these and ignore the others, and that's how the discourse goes.
(and media)
We just suffered through 4 years of everything as little as a cute firefly in your backyard dying being the President’s fault. I guess last January they finally had a change of heart and now the President can’t possibly be responsible for almost anything bad that happens.
the corporate greed angle is justifiable because some part of the inflation can absolutely be attributed to the maxing out of the global supply chain.
our supply chain is optimized to perfection, it means companies consciously made the decision to ship US grown cotton overseas to Asia for processing and manufacturing into clothing to reduce cost. This back-and-forth takes time and eats up supply-chain resources.
Powell has one real mandate: preserve the asset values and thus the power of the current ruling class.
He only accepted problematic inflation when it was no longer politically possible to deny it. He's now making non-committal statements regarding continued QE and fed balance sheet reduction.
The fed is backed into a corner. They either pop the asset bubble and lose their jobs, or let inflation continue unchecked until their bosses(politicians) lose their jobs.
They have a politically powerful generation(boomers) going into retirement. They'll do what it takes to keep them happy. Those folks are already looking at significant inflation in health care due to the mismatch between supply and demand there. Covid is only making that worse by causing early retirements and discouraging young people from going into health care.
Regardless, gotta be foolish to think all prices will settle back down once the "supply chain" unkinks itself.
The inflation driven from dollar printing is definitely contributing but a large portion of it is because of lack of labor.
An average software engineer in Germany only makes ~3000 euro per month after tax and even less in other European countries.
* https://www.morgenpost.de/vermischtes/article233549815/aldi-...
The work of a few engineers can support a workflow of a million users.
That spending $1 on engineering can bring in $10 of revenue.
And they probably want to deal only with engineers from the U.S. for legal reasons.
And up until recently, they’ve only hired in the Valley.
Finding qualified distributed system engineers with that funnel would definitely reduce the pool to several thousands.
Why wouldn't they be? US companies that drive up the salaries are extremely profitable and they compete for limited pool of engineers.
Europe remains fairly isolated from this effect because (a) not enough EU coders want to move to the US even at triple the salary to cause a shortage of coders there and (b) FAANG and US firms can get away with paying less in Europe because remote work is not yet quite equivalent to being on-prem in the US...
Why don't German developers move to SF or London? Some do, but then they're not software developers in Germany...
Why don't SF and London companies hire Germans to work remotely? Some are willing to - but they're also willing to hire Polish and Bulgarian developers, so the market rate isn't that great.
ionised then?
14%, over more than 6 years...: "Compared to 2015, they were even 14.1 percent higher in August 2021" from your article.
That's not even 2.5% per year. Central bank's target is usually around 2% of inflation per year, this is considered a "healthy" inflation rate. So nothing to see here.
However it has been +4% in just the last year, which while not being anywhere near dramatic is high.
> (not confuse with inflation)
What do you mean? This is inflation
Now compare to the "rich" American ~$4500/month for childcare until age 5, and lets not start with healthcare, and average cost of an apartment
*edited as I made an incorrect assumption just now.
There aren't even that many options for parents, many under 5 day care companies won't do 10 hour days. Lots of "2s programs" which means 3 hours 3 times a week where I am.
In the US, healthcare is provided as an additional benefit on top of your gross salary. Whereas in Europe it is taken out of your gross wages in the form of tax.
Obviously there are still issues with copays etc, but the bulk of the cost is actually additional to your salaries.
On apartments, I'm not sure how true that is these days. You can easily pay 2k+ EUR/month for a nice apartment in Berlin or Munich (even Lisbon, where I lived recently - where the local minimum wage is close to $3/hour!). Cheaper than the NYC or SF, but nowhere near the difference it was a few years ago. There are also many low cost of living places in the US where you'll pay a fraction of European housing costs but still get vastly more salary.
Most Europeans seem to have their head in the sand in this (I say this as one). They completely underestimate the salary differences between Europe and the US for middle class jobs, and vastly overestimate the benefits they get from the higher taxation. It is just not possible to say someone earning 3k EUR/month after tax is doing better fiscally than someone in the US earning $200k for the same job, paying 30-50% less tax.
I think it is actually rare for health care to be completely paid for out of pocket by the employer. Comparing with several peers in and out of tech (including one at FAANG), most companies only cover a portion of the health insurance premium cost per month. Retirement benefits also normally require you to contribute money from your paycheck. (For example, a company might contribute $0.5 per $1 you also contribute, up to a percentage of your salary)
Plus, there are usually still loads of out-of-pocket expenses even with insurance.
Point being: I think the math is more complex on this one.
Healthcare in America is bad for the median but very good for the privileged.
$4500 * 12 = $54000. I don't have kids so I can't call on personal experience, but Spending the median household income after tax on childcare seems high.
[1] https://www.census.gov/library/publications/2021/demo/p60-27...
If you don't have rich parents, you are in a terrible spot.
At least a few years back you could get in as long as you could code.
I got to 6 figures without a degree, it might be harder now, but you don't need to attend a top school to become a programmer.
I was refuting this. I've never heard of anyone needing to attend a prestigious University to become a programmer?
As a side-note, I don't think "respectable" and "prestigious" are synonymous, so you might be reading too much into their claim.
Most employers, aside from I guess a few select fields, don't care what you majored in. My degree's in some non sense, but I know it helps me get past automated filters. My first decent job was with a startup which are easier to get into.
I mean, I've heard that shitty customer service jobs with abusive customers, abusive bosses and terrible pay are having a lot of trouble hiring right now - but you can get customer service jobs without a college degree.
This time seems worse in ways. I can’t imagine having to have been locked down at that age. It felt stunting and anemic enough as it was.
The good news is that when you’re broke, you don’t have any material reasons to shun exploring personal philosophy in earnest. You’ve got nothing to really lose.
The hard part is staying fed and paying rent at the same time.
I don’t know that there’s an easy answer to that last one. For me, I paid my rent by working as much warehouse overtime as I could and stripped my grandmother’s soda bread recipe down to flour, soda, salt, water and a sliver of butter.
Tempus fugit, kids. Life is rich in spite of any dysfunction. Time will keep moving, and nobody gets to stop it.
As Neil Young aptly put it:
“don’t let it bring you down, it’s only castles burning”
This all assumes earnings rise with inflation, which does seem to sort of be happening.
0. https://www.zerohedge.com/personal-finance/us-consumer-price...
Yes I know there are a lot of progressives / young people who were hopeful the current administration would "cancel" their student debt. While the idea that the executive can simply erase a few trillion of gov't owned debt with an executive order was and is legally dubious, I think a lot of folks aren't aware that the administration is, in fact, wiping out almost 10% of their existing student loans per year via inflation.
Meanwhile, the admin has continued to extend the moratorium on student loan payments and interest accumulation, so they are, in fact, fulfilling that campaign promise, at least partially. Though I'm not sure they want to advertise that, lol.
But the only real reason it feels like the moratorium got continued is because Build Back Better failed and the Biden administration didnt want to compound that political failure with also breaking a major campaign promise. Though continuing student loans during election season also seems politically non viable as well. Especially if an astute Republican hits the drum of "make them zero interest!" to combat the issue.
The real problem is that I had heard (https://thehill.com/opinion/columnists/dick-morris/302247-lo...) that provisions of Obamacare actually use student loan interest payments as source of paying for that program. So a major democratic program is reliant on Student loans. This makes it even mnore of a political vulnerability because Republicans attacking student loans also weakens Obamacare.
To put the cherry on top. The Federal Reserve probably really wants student loans to continue. People paying those again is a powerful deflationary measure and puts less liquid capital in the market. It feels like the current admin from a policy perspective REALLY wants to start them back up, but know its politically damaging to do so.
Interesting about the Obamacare funds. Obviously all debt payments to the gov't are subsidies to some other group, but I did not know that these indebted students were literally funding another program that they themselves advocate for (though they assume it can be paid for if they just tax the "billionaires" a bit more). Their heads would explode if someone told them that we could have Medicare for all (another huge line item they want) if we just bumped up the interest rates on their own student debt.
Funny how none of the progressive politicians (e.g. AOC) who claim to want Biden to cancel the debt have not come clean with their Twitter fans - that in order to cancel the debt, it'd come at the expense of Obamacare subsidies for people much poorer than most of the indebted grads who want the debt wiped away.
I wonder how much wage growth is actual a shift in the average from the lowest wage people losing their jobs. There has been a marked increase in hidden unemployment / non-participation.
There seems to be a hope that inflation will act as a debt forgiveness, or a gateway into MMT to support progressive spending. My point is inflation will exacerbate wealth inequality which is worse than the gain from the 'debt forgiveness' of student loans and MMT requires high taxes to avoid inflation. Which is fine until you're the one paying those taxes.
But I also think the student debt problem is more nuanced than just "terrible majors". Tuition has increased faster than just about anything (sans healthcare, I believe) while wages were mostly stagnant. Previous generations could largely get through college debt-free working part-time at minimum wage, regardless of major. So I don't think the student debt crisis can be chalked up to "terrible major" selection. The level of student debt is, in part, driven by the way universities spend money to attract "customers" err...I mean students. I think we need to find a way to mitigate colleges being run like businesses in that respect.
Just the nature of this thread (cost, ROI, supply & demand) shows how much of college is thought of in a business mindset which is a departure from how it used to be viewed.
I would also argue that while the economy may not need humanities majors, society probably does. E.g., An engineer can tell you how to do something (e.g., develop facial recognition for public cameras or develop attention maximizing social media algorithms) but an engineer with a grounded understanding of philosophy can help determine if that's the right thing to deploy as policy and whether they, at the individual level, wants to support that with their career choice.
I'm not saying you're doing this, but you often hear a chortled reply about "underwater basket weaving majors" in these discussions being blamed. Certainly, people are accountable for their college choices, but the whole discussion is based on the idea that college is a business transaction that requires some ROI and ignores the systemic effects that have driven costs to a ridiculous level.
But there is! Few parents say "I hope Jimmy grows up to become a great carpenter." White collar professionalism is what we groom our kids for.
Sure some will hang out all day. But some could be the ones that think of the next jump in technology. Some could be amazing artists.
We need to stop tying self and societal worth to dollars earned per hour.
The people in this world who do the least take the most. It needs to stop.
Those of us that scored in the 95th percentile and above were singled out by the recruiters and all 40 of us got a 15 minute sales pitch to join the military.
They never got any engineers, programmers, doctors, construction managers, tile setters, welders, insurance adjusters, lawyers, police officers, nurses, radiologists, tugboat captains, pipefitters, machinists, draftsmen, etc...
People say this, but it is so often said by people not in these industries. My brother in law is an electrician and he gets paid badly, works rough hours, and is provided fairly limited safety by his employer. This is obviously a data point of one, but the fact that he feels incapable of finding a better job in his city indicates to me that this is the norm.
Coincidentally, I also have a brother in law who is an electrician, and he is not doing well. But then again he's a self proclaimed communist and has zero work ethic.
I chose not to pursue higher education personally (at the time for the wrong reasons), and one thing I remember very distinctly was just how much it was promoted as “the path forward”. A counselor was visibly shocked when I as a sophomore, hadn’t been grooming myself to appeal to colleges and universities in a few years.
I’d say I’m pretty progressive on most issues, and obviously I have sympathy for my friends that ended up this way, but I have to agree with you that one way we could end up with fewer people limping along is to just keep them from shooting themselves in the foot.
It seems like healthcare was axed in many countries to pay for the bank blunder.
Did not backfire at all.
Poor next generation. I at least got the 90s. Anything after 2001 has basically been one crapload after the other in mass surveillance and debt collection for the masses.
Uff
And just wait for people to travel again and catch up with lost trips. Hotels are going to be quite expensive, and that industry is in need of money so do not expect them to moderate that increase.
It doesn't work like this in my family. A couple years of limited eating out and limited vacations are gone. It's not like a person can abstain until 70 years old and then make up for a lifetime of no sex.
The main tools in their toolbox to do that are "raise interest rates" and "cut government spending" neither of which sound like fun given all the economic damage the pandemic has done.
I'm glad I'm not the person who has to decide....
Inflation is happening quickly all across the world, not just in the USA. Inflation is popular with debt holders (home owners!). We can literally just accept modest inflation.
Maybe it's politically bad for the party in power, but I just don't see Trump in 2024 calling for interest rate hikes unless he wants a mutiny from his own party on his hands.
As such, I don't see why we have to actually fight modest inflation at all.
You don't need a feasible solution to call out the failings of your political opponents.
Trump can just say "the economy under Biden is very bad, a lot of people are saying food is much more expensive, and they're poorer under Biden. America needs a smart leader who is good at business to make america great again"
During the recovery from the 2008 Great Recesssion, reactionaries pushed inflation, inflation, inflation - they sold gold on popular national shows of a certain cable news channel - but to no apparent effect. The economy was at much more risk of deflation and only their own tribe seemed to listen at all (afaik).
But the world has changed significantly since then. Now the most powerful actors in our society are now the mass reactionary disinformation campaigns, which very broadly seem to serve the interests of the same or similar groups. They seeem almost unchallenged in their supremecy over 'truth' for much of the population - even people I know who should know better seem to just accept them. It seems that they can merely repeat just about any claim and no matter how nonsensical, people will join in (in fact maybe the more nonsensical the better).
With their new tools, their inflation push is arguably much more powerful. Are there resources which track the activities and focuses of disinformation campaigns?
Typical AP article.
Reagan came into office facing high inflation (it started when Carter was in office), it broke when he was in office.
Fact: Reagan won re-election with 49 of 50 states. Had inflation still been raging, that's not likely, is it?
So disappointed with yellow journalism.
There's also shadow inflation, where you pay the same as before, but get less, or pay in other ways. You can see this with hotels for instance. The price of a room hasn't changed, but many hotels have reduced the number of services that are included like the frequency of cleaning, free breakfast, etc. So you're paying the same amount for your room, but you're getting less value in return. How does this get reflected in the CPI?
And this is bad... how? I'm not sure how presuming the opposite (ie. demand stays the same) makes more sense. For instance, during the 1973 oil crisis, supply was literally lower than demand. If we expected demand to stay the same (for whatever reason), wouldn't the price of oil go to infinity?
>How does this get reflected in the CPI?
hedonic and/or quality adjustments are done for certain CPI categories.
They tell you exactly what they are buying and do, in fact, adjust for qualitative differences like reduced service at a hotel.
The entire point of the CPI is that it is an exact representation of what buying the exact same set of things exactly one year of part will cost.
The socks are irrelevant as far as CPI is concerned since it concerns itself with pricing only, and not the knock on effects of reductions in demand due to pricing.
There are teams of PHDs in every major country in the world that only work on this one number, their methodology is then picked apart by more teams of phds in academia who produce alternate methodologies and slightly different numbers. Do you really think that in the past 100 years of doing this work that they haven’t come up with ways of adjusting for the fact that Motel 8 stopped serving waffles?
The original point in this thread was that it's laughable to do this to tenth of percent or more, when as you and others freely point out that a lot of this is qualitative and not quantitative.
If I buy figure out the cost to obtain 100 grams of Cheetos at ten convenience stores in urban areas I can very much tell you the price change with two significant digits. We get it, you don’t like the way they measure inflation. But the CPI is not some hand wavy number, and your comments across this thread indicate that you also don’t understand what it is and how it is derived.
Well, [1] quotes Alan Cole, who is "formerly a senior economist at the Joint Economic Committee of the U.S. Congress"
He believes that, although the official figures aim to account for quality changes, they fail to fully capture the current deterioration in quality. (he also believed, in the past, the figures failed to fully capture increases in quality)
The article gives the explicit example that hotel prices may be the same or higher, yet hotels are skimping on the services they used to provide. Reductions in maid service. Fresh, hot breakfast buffets replaced with plastic-wrapped pastries and warm milk.
After all, plenty of item categories that make up the CPI just don't have hedonic quality adjustments applied [2] - including HB021 and FV051.
Do you believe you understand the inflation statistics better than Cole?
[1] https://text.npr.org/1048892388 [2] https://www.bls.gov/cpi/quality-adjustment/home.htm
FWIW the CPI does attempt to measure this: https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
> To measure price change accurately, the CPI must be able to distinguish the portion of price change due to this quality change.
Everyone should keep in mind that inflation for each individual is different because we all consume different things. The BLS calculation is a weighted average of prices. It’s their best guess and they don’t hide how they make the guess.
What is wrong with their methodology? How should it change? Have you read about the different measure they use and how they make their calculations? Do you think they shouldn’t measure it at all?
We’ve all experienced a general rise in prices the past year and have a sense that something abnormal is occurring. BLS’s calculation confirms this. Our sense of abnormality is confirmed by the data.
1. The experts act as if they skipped the first month of high school science class.
2. You don’t understand the topic well enough.
E.g. we should have seen headlines saying inflation has been increasing dramatically over the last few years as housing prices have shot up, but conveniently for politicians, housing prices were not included in the ‘basket’
The cost of housing, not houses, is the biggest single component of the CPI. That means that the cost of rent, or rent equivalent, is very much factored in.
We very much do have headlines about the crazy costs of houses. But housing costs, that is the price to consume one month of housing service (aka rent) are a different thing.
Let's take just one example, Nobel Prize winning Economist and New York Times contributor, Paul Krugman.
The 1998, this gentlemen made the following bold declaration:
"By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s."
This is the same individual who mocked anyone who questioned the dogma of unlimited globalization and free trade in the 80's and 90's, only to admit later that he and others were very wrong about the damage it would do to the American middle class.
And then there's the fact that Krugman and the vast majority of economists completely failed to see the 2008 crisis building.
And mind you, Krugman isn't just any economist, he's a Nobel Prize winning economist who writes for "the newspaper of record".
So yes, when the "experts" of economics get things so miserably wrong, I'll stick with my original claim that they skipped the first month of high school science class.
Economists are modern-day tarot card readers.
Basically, each month, the Bureau of Labor Statistics (BLS) hires people to manually look up the price (online, in person, of by telephone) of 80 thousand different items, then computes a weighted average price change. The weights come from the Consumer Expenditures Survey (conducted by the Census Bureau on behalf of the BLS) of 8 thousand households to collect data on how much they spend on what.
Is inflation negative? (will never be true anymore)
Is inflation 0-5%? (somewhat acceptable)
Is inflation 5-10%? (dangerous level)
Is inflation 10-100%? (critical level)This would be strictly worse for the United States than any of the other options. It would result in hoarding and the cessation of spending which would likely destroy the economy. Please don’t post stuff that seems like common sense but is in fact not sensical at all or at worst a complete fabrication which I’m guessing this is by the numbers.
Probably why he said it will never be true? The fed would never allow deflation.
I did not say it should or would.
It's like IQ tests. They're measuring something that may or may not be what some people think it measures.
Sota Mayorga at the Supreme Court hearing this week, citing 100k kids in hospital with Covid, is an example how misinformation is fuelling these terrible fiscal policies. Rationality is out. Scary "Virus" panic is still in.