US Consumer Price Index up 4.2% | Hacker News Reader

US Consumer Price Index up 4.2%

bls.gov

275 pointsortusdux306 comments

Remember this next time you get your yearly review/raise. 4.2% is what you need to stay even, anything less is a pay cut.

Many people here make more than they spend, and this is simply inaccurate when that's the case.

edit: I've explained how this works in a reply below.

No. What isn't spent now is future spending. You are still getting less.

It's still a cut in purchasing power even if you aren't hurting.

But if you don't mind, I'll take 4.2% from your pay.

How is it inaccurate? If I only care about buying apples, and apples get 10% more expensive, and my salary only increases by 5%, then I can't buy as many apples as I could have before. How many apples I do actually buy in the end is irrelevant to the calculation.

The person you're replying to erroneously interpreted "stay even" as "avoid going into debt," instead of your income's purchasing power remaining constant.

Consumer price index is about consumer goods. This is why tarrifs and such are considered regressive - they hit people harder the less money they have because a larger percentage of their spending is consumer goods.

If I invest half my income and spend half my income, and the prices of goods goes up 4.2% and my income goes up 4.2%, then I've made progress; I'm now investing more than half my income, because the half of my income I was spending has stayed even and the half I was investing has increased.

> If I invest half my income and spend half my income, and the prices of goods goes up 4.2% and my income goes up 4.2%, then I've made progress; I'm now investing more than half my income, because the half of my income I was spending has stayed even and the half I was investing has increased.

Let's say your income is $100. You spend $50 and invest $50. The prices of goods goes up 4.2%, so to keep your current living standards, you must now spend $51.20. Your income increases by 4.2% to $104.20. After expenditures, you now have $51.20, or exactly half your income, to invest. So you haven't made any progress. And investing $50 now is equivalent to investing $47.98 before in terms of what you could have bought instead of investing.

Oh yeah, oops, thank you. (Btw 52.10 not 51.20, but yes, half of 104.20).

No, it's like, if you could buy 100 things before, but you can only buy 96 things now, then you have accumulated less value :D

I disagree. "Money" has many meanings, absolute and relative.

Receiving "market" compensation trumps real-world expenses, since the market for one's labor is a different market than the real-world expenses.

Not necessarily, depends on the distribution of your own expenses. If you deviate from the average urban household (lets say, you have a particularly long commute or your car isn't as fuel efficient as the average. Look at the increase on fuel prices, 40.5%!).

If you're at $5,000/month, a 4.2% raise puts you at $5,210. If you're spending $600/month on gas (not unreasonable for someone that drives an SUV and lives in the suburbs instead of in the urban core), you still come out behind.

Don’t forget the obvious ‘finger on the scale’ influence from the administration too.

Why can't we just water down the gasoline? /s

That's what E15 is for.

Have the American people just tried cutting a whole in the car floor and flintstoning it? Yabba dabba the DOW is up people!

>> If you're at $5,000/month, a 4.2% raise puts you at $5,210. If you're spending $600/month on gas (not unreasonable for someone that drives an SUV and lives in the suburbs instead of in the urban core), you still come out behind.

This is the problem with people treat CPI as some word from the heavens...it is not. CPI is a highly constructed figure which conveniently includes/excludes things and is really more a floor of what the inflation is. Anyone living in the real world knows experienced inflation is way higher.

> CPI is a highly constructed figure which conveniently includes/excludes things and is really more a floor

It’s an attempt at a central tendency in a complex economy with non-linear variability.

> Anyone living in the real world knows experienced inflation is way higher

Here is a map of wage changes across the U.S., 2024 to 2025 [1]. Lots of variance! If you’re on the West Coast, right now, you’re seeing above-CPI inflation. If you’re in the Northern Rockies, where I am, you’re seeing less.

[1] https://www.bls.gov/charts/county-employment-and-wages/perce...

Also, any asset that isn’t appreciating at least 4.2% is losing value.

Ah…inflation.

And you're still taxed on the "gain"

And now we see the picture come together.

The solution is Treasury Inflation Protected Securities (TIPS). You do have to pay taxes on the inflation adjustment (OID income). As long as the interest (after taxes) is higher than taxes on inflation adjustment you're good.

Don't forget the $10,000 annual limit of purchases. If you want to go heavy into TIPS, you can hit that limit pretty quick.

It means you already had the paycut, you need to have at least %4.2 rise + reimbursement to make even.

In high inflation countries you often get a revision every 2-3 months and you get a rise that is higher than the official inflation, as a result this solidifies the inflation and boosts the economy as everyone immediately buys whatever they can before it becomes more expensive. It's a vicious cycle.

Argentina, for example. Coworkers there told me about this. Madness.

You and your employer should consider future expected inflation at the time of negotiation. You don't need a true up in that case to "break even!.

IRL most of the time there's no negotiation, you find out your updated salary when the money hits the bank.

At initial employment there is salary negotiation. Each COLA then automatically inherits whatever assumptions were baked into the starting number.

And hopefully the other candidates applying for the position have similar inflation expectations to your own!

Reminds me of stories from ex-Yu during high inflation periods (e.g. yearly doubling; not counting periods when there were runaway spikes of almost daily doubling) when people would go to remote areas where shops didn't yet get the updated prices from headquarters and basically walked away with a bunch of near free stuff.

Small independent shops are often having trouble with keeping up with the prices, so checking out those shops sometimes yields great deals.

They should clearly buy e-ink price displays! /s

Much more since the numbers are cooked anyways. Car model N cost 10k, and car model N+1 costs 15k, if N+1 has 2 more airbags, one more gear, a keyless starter it will be counted way under 50% inflation, even though you pay 50% more.

Most of the average joe's money is spent on housing + food + energy these things are all way above the calculated """average""" inflation

They're not necessarily "cooked," (but they certainly can be). Inflation is genuinely hard to calculate since it's different for everyone, goods and services purchased drift over time, and as you mentioned, that exact good also changes over time. CPI (and others) are more useful in a MoM or YoY context. At 10 years, it's better viewed as best guess cost of typical living rather than an economic indicator comparing apples and oranges.

> housing

This is actually the hardest to get right because it's the largest, and 2/3 of Americans own homes, so part of their costs are fixed.

No it's cooked. For high tech items, they assume that improved technology means you are getting more for your money even if the price goes up, so they discount it. It's true that you get more for your money, but it ignores threshold effects, like you just can't buy an equivalent phone for $10 even if todays phone's are 200x better.

Then there's the "owner's equivalent rent" BS and this is 25% of CPI. It answers the question "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished, and without utilities?" It assumes rental price and housing costs are somehow linked when in reality asset prices have far outstripped rent.

why should the asset prices matter in OER? the aim is understanding cost. BLS no longer questions homeowners but samples local rents to estimate OER since homeowners could've been wrong in their guess. of course, someone may have locked in a low interest rate so their expense is overstated. counterargument is that you are consuming a more valuable service by occupying the unit even though market rent exceeds your costs so it doesn't matter if your cost is assumed to be the market rent. note there is a 6-month sampling lag of rents, which doesn't help the perception gap in the inflation figures.

> it assumes rental price and housing costs are somehow linked when in reality asset prices have far outstripped rent

It's pricing the cost of shelter. Renting a home is buying shelther. Buying a home is buying shelter and buying a financial asset. OER is the way you separate the last two components. Otherwise, you'd have to only look at rents to determine housing prices, which would be rubbish in a country where most households live in homes they own.

Suppose you want shelter. It used to be that you could buy a house for a reasonable price and move in. But now that's unaffordable, so instead your have to pay rent. In CPI thinking these are equivalent forms of shelter, but I bet if you asked most Americans, they would not agree with you.

> But now that's unaffordable

Which flows through to owner-equivalent rent, in part.

> In CPI thinking these are equivalent forms of shelter, but I bet if you asked most Americans, they would not agree with you

It really doesn't. When measuring rent, you directly measure rent. For OER, you're measuring the housing price and imputing shelter cost from that. They're similar, but different. Sort of like how renting and owning are similar, but different.

Also, given the variance in housing affordability across the country, you'd almost certainly have to strip out any financial-asset component anyway to meaningfully compare the resulting number.

>Renting is buying

American education.

> 4.2% is what you need to stay even

On average, nationally. Look up your state or metropolitan-area CPI. Or better yet, track your actual expenses and project forward.

True, but how inflation affects each person is different. This isn't a good measure, but it is the best we have, and usually close enough to the truth.

I agree it’s not a perfect measure, but I conclude “it is the best we have, and usually close enough to the truth” makes it a good measure.

A conversation with your boss about a COLA raise really shouldn't include your own personal finances. "I just bought a house" is not a good reason for a raise; "prices in our area have increased" is a much better one

Typically, you need a little more to make up for the difference in how much more taxes you pay at the marginal end vs the average for your total income...

The median earner with a standard deduction would need a ~4.7% raise to stay even...

"Inflation" is also increasingly distributed unevenly. The top 10% continues to make up a larger and larger portion of spending. It is entirely possible for ~4.2% inflation to be substantially higher (or lower) for the median household than the overall reported number.

Tax brackets are also inflation-adjusted, so shouldn't that cancel out?

No it pushes you into a higher tax bracket earlier so also acts as a tax increase

I think the point is the tax brackets are supposed to be inflation-adjusted. So all the brackets go up 4.2% too. Idk if the implementation details make this actually work out 1:1 but that’s the idea.

That's what I was thinking.

Most of the relevant numbers in the American tax code are inflation adjusted, but not all of them. The biggest ones for people on this website are probably the value of the Child Tax Credit and the thresholds at which the Net Investment Income Tax/Additional Medicare Tax kick in.

Don't forget prop 13 in california, probably many beneficiaries of that policy on this forum.

Prop 13 is the other way around, inflation is to the taxpayer's advantage.

Important distinction: to the "HOME OWNER"s advantage.

This is why it's important to get paid in stock. I get an automatic extra 100k a year if inflation runs hot!

What advantages does that have over taking your paycheck 100% in cash and investing in index funds?

In most cases, you are granted a notional dollar amount that is immediately turned into a concrete and fixed number of shares that then vest over the next 4 years.

Then, any share price appreciation on the shares is captured by you at vesting, rather than being paid in cash (the value of which has been inflated away) and then purchasing shares/index that has risen in the last 1-4 years.

If you are paid in cash, you will be buying fewer shares per dollar (and per year) rather than getting the same number.

Right, but cash compensation could be structured the same way, minus whatever would be settled on for the retention value to the employer of the vesting schedule.

I get your point. The value of stock isn’t that it’s stock per se, but rather that it’s inflation-resistant even when illiquid.

It's optionality that only has an upside financially, while the downside is just having to do more interviews.

Let's say you're worth 300k on the open market as a senior software engineer. If you get a job that pays 200k a year + 400k in stock over four years, you're making ~300k.

Except if after the first year, the stock goes up 30%, you're making 330k the second year + whatever cash raise you get. Then if it goes up another 10%, and so on... etc.

If, however the stock falls after the first year, presumably you can go out and find another 300k a year job at a different company.

Because I get way more money.

hope you dont work for salesforce

If inflation due to energy costs is running hot they’ll have to raise rates which will cause stock prices to fall.

We are bottlenecked at energy supply, not running hot via demand. Raising rates is likely to stifle already weak sections of the economy. Additionally, we are getting into territory where raising rates threatens our own ability to pay our debt.

Just to be clear, I am not coming at this from some anti-interventionist or anti-monetary tool standpoint. It's just that demand side tools seem like the wrong lever for the job. We are backing slowly into the corner of persistent inflation or structural failure of some kind.

I've known a few people who lost everything when the company went bankrupt. (most died of old age when I was a kid - before pension reform companies often did put your retirement in the company stocks)

Most employers in the US don’t realize this and act like cost of living adjustments are major rewards if they do them at all.

This never made sense to me. Doesn't this assume you are spending ALL your income though?

If I make 100K and get a 3% increase, that's $3000 more.

But if I only spend 30K to live, and my living expenses go up 5%, that's only a $1500 increase to my living expenses while I earned $3000 more that year. So how is that a pay cut if I actually have even more money left over that basically just goes into my investment account then.

It's about the worth of what I am receiving from my employer and nothing to do with spending it.

If John makes $100k and lives on $10k, then cost of living increases by 100%. I believe John should be paid $200k, and according to you his salary should go to $110k.

> Doesn't this assume you are spending ALL your income though?

Why wouldn't you be? You will die, and the vast majority of religions (including atheism) don't let you take it with you. Sure there is some saving for a rainy day or retirement. However why are you earning more than that? If you need a job for social reasons only there are plenty of volunteer jobs that can provide that.

Do you have children?

I save for retirement yes. I only spend about 30% of my income to live and other other 70% I save for retirement.

I don't feel like I'm being cheap or limiting myself. I have hobbies that I enjoy, computers, home theater, pickleball, scuba diving, hiking, biking. I travel a lot for fun, backpacking and trips around the world to see cool cities, hike mountains and experience different cultures.

I don't find my job particularly demanding or stressful, it's flexible, the people I work with are nice. I just spend what I feel I need to spend to do what I want to enjoy myself and the rest I put in investments.

I know I can't take it with me, but it just means I will be able to retire that much sooner.

I get a 3% raise every year as the default, aside from promotions and such, and the amount it gains me is about 3x higher than my cost of living increases have been these past years, so it really does not feel like I am making less. I am living my same life that I enjoy and saving a bit more and more each year.

You are exactly right. You are most likely not getting a pay cut just because your raise doesn't match inflation. It totally depends on how much of your money you are spending and what you are spending it on.

The dollars going into your account are worth less than before. The ultimate destiny of all money is to be spent on goods/services eventually, and the amount of goods/services your salary can purchase is net (5-3)% less than the year before. Invested, spent, willed, donated, it doesn't matter, the money is already worth 2% less when it enters your hands. (Worth noting that CoL increase is not exactly equal to inflation, you could experience a local CoL increase without inflation if say your town becomes a popular destination which raises rents)

But a huge percentage of Americans are spending all, or approximately all, of their income. (I don't know offhand if it's technically a majority, but if not, then it's not far under 50%.)

And these are the people who are going to be most affected by inflation and other price shocks.

Paradoxically, inflation has contributed to me taking a sabbatical. While I live in a LCOL area and made ~140k/year it just no longer felt worth it to work as I saw my retirement accounts start to match and exceed my salary in yearly gains. I do plan on going back to work in a part time manner, but inflation has killed any reason for me to work hard at a job for that level of salary. Furthermore, the feeling of "what's the point" around white collar work has never been more intense.

Are you assuming yearly wages not increasing to match/exceed inflation every year?

The logical point here doesn't make much sense to me otherwise.

Cumulative inflation since 2019 has been 30%. More with these new numbers, I think.

What jobs have the wages gone up 30% in that same time period? I’m sure a few, but not many.

I'd say almost no one gets a 30%+ increase staying in the same company. There was a short period between 2019 and ~2022 when tech was hiring like crazy and you could just hop from job to job for huge increases every 6 months to a year.

The problem is that is now over, and so wages are back to being suppressed again.

Hourly wage for all private sector workers is up +32% since Dec 2019 ($37.54 vs $28.38)[1]. For non-management workers +35% ($32.31 in May 2026 vs $23.85 in Dec 2019)[2].

[1] https://fred.stlouisfed.org/series/CES0500000003

[2] https://fred.stlouisfed.org/series/AHETPI

Also is having twice as much money (1x from interest and 1x from income) not a benefit?

Maybe you are the strawman consumer that skeptics point to in guaranteed basic income debates, who just stops working because they get a check.

The only thing I want to spend a bunch of extra money on is a nice property and making twice the money would not get me there in what I consider a reasonable amount of time. I'm also not interested in going on an extra two fancy vacations per year or a nicer car. I'm plenty content to read, cook, learn, and enjoy the arts.

If the first 1x covers all your spending, what else are you going do with the other 1x? Invest it in even more investments to produce more income that you already cannot spend? That turns into what is essentially working for free. Why bother?

That turns into working hard so you or your descendants can eventually own the world. Jeff Bezos did it. Elon Musk did it. Bill Gates did it. If any of today's billionaires stopped when they had enough money, we wouldn't be talking about them.

Except all of the above settled for 1x, quitting their jobs (where they had one) to pursue their personal dreams. It so happens that their dreams also turned into something valuable, but that's secondary. They would have never been able to seek out their dream or turn that dream into something valuable had they accepted 2x.

In the tech industry? Absolutely they have not, and in fact have likely gone the other way.

Unless you're maybe one of the few specialists in deep learning, CUDA, etc.

There's been mass layoffs and downward pressure on compensation all over.

I don't work as a specialist, nor at any "special" company in the tech industry, and my yearly wage increase has met or exceeded inflation. Nor has there been any layoffs at my large company.

My salary has not kept up with inflation over the last 15 years. The industry I am in, which is not related to tech, has undergone massive consolidation leading to 2-3% raises some years and no raises other years.

I don't understand this point of view. $140k in a LCOL is a fantastic salary. Median US household income is $83k/yr.

It feels more likely your investment account gains are driving your decisions. Stock gains are also driven by inflation though!

I can sort of understand the feeling though, I just recently got a 2.5% raise for "inflation", which hardly feels like it's making a dent.

I don't think that OP meant to say their wage income was low.

I think OP means that once their investment returns starts exceeding their wage income, their motivation for continuing to work drops.

Which, I kinda get. If you don't really like what you're doing, it's harder to stay motivated at continuing to work when your bag of money makes more money than you do.

It sounds like OP is already planning on some amount of return to work, which may be necessary because that exact point (investment returns > wage income) isn't necessarily a safe point to retire. But it might be, depending on how much you spend, and what your not-employer-funded healthcare costs are.

Y"eah, the same reason we're going to have a trillionaire soon is why even if someones making a great salary, their 401k is inflating faster than they need to earn a living in a low cost of living area.

Absolutely absurd, but if you got the upswing between 2010-2020, you might be in an upper class while still living in lower class, meaning your 401k is all you need to survive on while the billionaires continue to pump the market as a defacto monetary instrument and leave the dollar for the poors.

Think of it like bitcoin, but instead of owning electronic worthless hashes, you own LLCs that own stocks and take out loans on behalf ot he LLC against those stocks.

Then you just trade those LLCs around as tokens of wealth.

Welcome to the great new oligarchy.

It's just yet another wealth transfer between classes. They can happen frequently and unpredictably, and usually but not always from workers to owners. If you happen to be in the class that benefits, you take the windfall.

UNFORTUNATELY, the movement from rich to poor is not gradual, pretty or effectively transitioned.

Not sure if you intend it, but the struggle to reverse course from rich to poor is bloody and not always effective.

Hacker news moment

I feel the same. Investments are shooting up and wages stink.

UK has very high taxation now so working full time doesn’t bring in as much as a decent portfolio.

You're still cutting your annual income in half though. That's pretty big no?

I have the same feelings as the original poster as I get further into middle age and have a good retirement nest egg - for me there are things more valuable - free time and the things I want to do with it but can't get paid to do - than making more income than I really need.

How much do you have saved?

Enough that a 5% annual return is enough for me to get by. I'm certainly not done working - I want to get that to 3% or so - but it does make it a bit demotivating some days when I look outside and imagine the other things I could be doing with my time.

I mean, I'm totally with you... It's just never clear to me what "enough" is.

I don't have a family, so it's manageable. If I had kids there is no way I could work part-time.

LCOL a good house might be 140k outright. Their costs are probably barely anything yearly against their returns.

The thing is at some point there is very little to gain. Once you have a nice place to live and don't need to sweat over daily expenses there isn't much that significantly improves life quality other than just having more time (that is working less) for yourself and your family.

Add high taxes to this and working is even less attractive when they take 50% from you. No wonder many highly qualified people decide to pass on that deal and just do the bare minimum which in OP case is nothing.

I would never, ever leave work regardless of the pay.

Regardless of your skill and reputation, time off can quickly put you below the bar for even getting a call-back, and you lose access to relevant lessons.

You'll be shocked at how irrelevant you become, and how quickly the retirement accounts will give up the gains of the last 3 years (particularly when this 2026 IPO summer terminates US equity markets).

The feeling of "What's the point" might have little to do with work, and more to do with (finally) losing faith in ambition. If so, don't worry: the best comes after we put aside dreams.

Oh no, you mean I might not be able to get another really annoying job so I can, what, have more money than I need to live on?

I used to get paged at 1am to mess with downed webservers, now I hang out in a shack with no running water in rural CO.

I'm 48 and have a chunk of cash that made more last year than I've ever been able to make in a single year doing salaried labor as a programmer.

I quit 3 years ago when my kiddo graduated college and have been just living on that and my small A/V production business.

It's great.

I do a lot of work; I have done first aid at one music festival, paid sound at a bluegrass festival, and sat around doing random volunteer stuff at another. I can give the local music school and the local civic orchestra really good bids on doing sound for them. I am going to get an EMT cert because I have a friend who contracts to do first-aid at festivals.

I'm not at all worried that my (pre-LLM) programming skills and connections are going away- I've replaced them with mandolin skills and much happier.

You are describing where I want to be when my kid graduates (years from now), mandolin and all! Low cost of living, contributing to the community, enough time for passions… Not able to get there yet but it’s what I’m working towards. I just hope LLMs don’t eat my current career path before I can achieve it.

This actually makes 0 sense. Like, do you even understand what you're saying? The value of your savings is decreasing at a faster rate than ever before, so its a good time to stop saving and spend it?

The stock market increasing is not the same thing as inflation. What you're saying makes sense only if you are referring to stock market valuation... strictly retiring because inflation is high makes no sense.

>The value of your savings is decreasing at a faster rate than ever before, so its a good time to stop saving and spend it?

Inflation does incentivize spending, yes. Would you rather have 100 kilos of rice today, or wait and have 99 kilos of rice tomorrow for the same price?

> Inflation does incentivize spending, yes.

All inflation incentivizes is finding an asset class that isn't devaluing. If that is what you mean by "spending" then we align. But does inflation incentivize spending money on depreciating assets? Only for fools.

??? "All" it incentivizes? Uh, no. The vast majority of people don't treat their salaries as an investment opportunity, they have to live off it. If you need to fix your water heater, you might get it fixed now while inflation is high than wait until winter (not a great example given the time scales involved, but it gets the point across). Even if you have nothing that you desperately need, if inflation is really high you might blow it on something frivolous because if you try saving it it won't be worth anything in one or two year's time.

Inflation doesn't push people towards non-devaluating assets, it pushes people to get rid of currency by any means they have available.

???

OBVIOUSLY if you absolutely HAVE to spend money because your life depends on it (ex: hot water) then you're going to be incentivized to spend it sooner rather than later in an inflationary market.

I'm referring to discretionary spending. Eating out. Buying a new laptop. Traveling. Etc.

This statement: "it pushes people to get rid of currency by any means they have available." is just flat out wrong. If you're draining your bank accounts on discretionary purchases right now, that's your mistake.

I would include retiring before you absolutely have to as "discretionary". Now is not the time to make a decision like that, when the alternative is a smarter financial decision (work, save, invest in assets that aren't devaluing at the same rate as currency).

It's not flat out wrong. If the means you have available include investing, you might do that. If they don't, you're still better off spending it on something not strictly necessary now that you're able to than saving it to have its purchasing power be eaten away by inflation.

Inflation absolutely stimulates spending. Especially if it's predictable and people are paying attention.

Peak COVID it was obvious inflation was going to hit hard in some sectors. So I loaded up on durable goods like HVAC, hot water heater refreshes, major appliances, and even pushed some home maintenance forward where labor and materials were likely to skyrocket.

I certainly made a bet, and a lot of it had to do with "lifestyle" - in that I wanted upgrades of most of those things either way over the next 5 years. I just pushed the spending forward by a whole lot since money was going to be rapidly worth less and those specific goods I predicted were going to outpace generalized inflation. I also wasn't certain my income was going to be secure for the long haul so I'd rather spend the money while it was still regularly coming in vs. being stuck later.

Same went for looking at laptops late last year. Since I'm in the IT industry it was obvious memory and flash storage prices were going to go parabolic, and consumer pricing was lagging the market at the time. If you saw this happening you'd be pretty silly to sit and wait on it for another 6mo.

And the same goes for investment class assets. As those outpace wage growth by multiples, your salary becomes less and less important. Once your salary is in the low double digits of your total income in a given year I'd say it's probably time to take a hard look at continuing to work. The juice no longer becomes worth the squeeze. And asset price inflation means this decision point is brought forward years - perhaps decades - for some people.

It obviously doesn't mean go YOLO in your 20's. But if you're 58 years old and were thinking you'd work another 8 years - perhaps it's time to reevaluate the situation. Adding another 3% a year to your dragon hoard via wage savings might not pencil out how you think it will.

> OBVIOUSLY if you absolutely HAVE to spend money because your life depends on it

Food. Clothing. Shelter.

For most people in the world, all or nearly all (or, in some cases, more than all!) of their annual earnings go toward these absolute necessities.

The way you talk here makes you sound incredibly out of touch, as if you think everyone has vast amounts of disposable income they can just chuck toward whatever investment opportunity looks best at the time.

Everything depreciates in a long enough term. What would you rather own?

Does it? Outside of a couple of rich island city-states, they're not making more land, so on a long enough timeline, that asset class is bound to go up eventually. Same with gold – there's a limited supply of it on Earth, so at some point we'll mine it all, and then what? The question is how assets perform on a given timeline, and how it does relative to inflation. I could guarantee you 1% a year returns if you give me money, but no one would do that because that's less than inflation, as well as a number of other classes of assets.

The price of land is approximately correlated to the total population, because that's the variable part of the supply-demand equation. If there's fewer people there's less need to grow a lot of food, less space needed to manage waste, less space needed to house them, etc. etc. There's nothing productive you can do with land that would justify a very high price if there's only 50 thousand humans in the world; if one parcel of land is too expensive just go find and claim a different one for yourself.

So, yes, on a long enough time frame, land also goes down in value, because human population is likely to at some point go down.

>I could guarantee you 1% a year returns if you give me money, but no one would do that because that's less than inflation

What do you mean, "no one would do that"? If you're guaranteeing that ROI, someone who's investing with you instead of holding currency at 2% inflation would see their savings depreciate by only half as much, at no risk, perhaps with just some liquidity loss depending on what your terms are for pulling out. I assure you there's people out there who would take that deal.

Yeah, we have that, that's treasury bills.

> Like, do you even understand what you're saying?

That comment is unnecessary and has the effect of making people feel bad.

I think the rationale is that wages are stagnant in comparison to investments (stocks) and costs (inflation). So there's decreased incentive to focus on wages as a form of income, and more incentive to focus on investments.

I've definitely felt this personally, as my income shifts towards investments, my will to work for a wage has decreased. That shift has increased because I've accured more investments, but also because investments have grown kind of ridiculously compared to my wage.

> So there's decreased incentive to focus on wages as a form of income, and more incentive to focus on investments.

That's been the case for a while now, and is steadily getting worse. But the issue is, workers usually rely on their wages to live. It's not a choice for the vast majority of people.

And it's unsustainable. You can't build a society of exclusively parasites that feed on the work of fewer and fewer hands.

Most people do not have money to invest. There should be a law that forces the rich to go on an annual safari to see how poor people live because we are literally entering "let them eat cake" levels and it will not end well.

> This actually makes 0 sense. Like, do you even understand what you're saying?

It makes perfect sense if the decision to work is based on real, after-tax income. Change the comment to say "the tax rate keeps climbing so I quit working" and it would not occur to anyone to challenge it.

Once you have enough saved to generate income covering the very basics (probably somewhere around $30k/year in a LCOL area in the US) it becomes a question of whether selling a 40-hour block of your time on a weekly basis is worth it. For this individual, it is not.

If you don't understand second-order effect that is. What happens when everyone stops working, either QoL falls or prices rise. Labor force rate is at 83.8% for prime age workers. (Most of the QoL add comes from immigrant labor while most of the QoL extraction comes from high tech. So this does complicate the math) The govenment then lacking revenue extracts more from prime age workers and raises the retirement age and early withdrawal penalties.

I saw this coming from a mile away. Jobs just don't pay enough anymore, especially with inflation eating away at money faster than pay raises and housing becoming unaffordable for the majority. It's barely worth it to work. But that is what US capitalism has optimized for. Prioritizing the rich capital owners over the proletariat with tax cuts, regulation cuts, not enforcing monopoly laws, spending money on wars and bailing out the large companies etc.

That's going to happen regardless of your individual action. You can take a sabbatical and suffer a raised retirement age, or you can not take a sabbatical, and still suffer a raised retirement age. If you want to solve it, a collective action (i.e. government regulation) is necessary.

Not 30k a year, even in a LCOL area. Where's your health insurance? Do you even bother with it at that level?

> Change the comment to say "the tax rate keeps climbing so I quit working" and it would not occur to anyone to challenge it.

Um, what?

Many people would challenge that, because it's absolutely bonkers.

The only way it could possibly make sense is if you're already wealthy enough to be able to retire. Which cuts out nearly everyone, even on this hopelessly-skewed forum.

Would you rather spend your savings before or after they become worthless?

Stock market returns will tend to exceed inflation. Salary may not. It's quite possible for inflation to make your salary shrink in real terms, making it no longer worth working if you can afford to retire.

There is absolutely no guarantee that stock market returns exceed inflation. The big US indices have for the last few decades, but they're extreme outliers.

I said "tend to," not "guarantee."

You'd expect this to happen with a couple of reasonable assumptions, like stock prices being somewhat based on real value most of the time, no wide-scale long-term economic collapse, and new companies replacing incumbents over many years rather than very quickly. If the real value of a company stays constant, then the stock price should, on average over the long term, rise at a pace that matches inflation.

He's saying there's no direct connection between effort and wealth. He works and made 140k, seeing his portfolio go up 140k a year by itself. So what's the point?

You and he are in different language games. His is an existential philosophical one, yours is the financial planning one.

Both make sense. I'm trying to transition to his, but I'm not ready yet.

What's the Point? is exactly the question we should be asking ourselves.

"This actually makes 0 sense … What you're saying makes sense only…"

I take issue with the phrase "makes 0 sense". Maybe it's just a common refrain these days?

Because you then explain how it could make sense. So it wasn't really zero, just required a narrow interpretation?

Equities rise and fall. Unless you fully cash out that stuff can materially drop and if you do materially cash out - it can inflate away.

Sorry to be a downer but there is no certainty on the future especially with the level of chaos being sown in the western world as a function of a few key people.

I understand that salaries might have been stagnant and with wages not keeping with inflation it doesn't seem to make sense to continue working.

The stock market often aligns with inflation. After all if the companies growth is not beating inflation what exactly is the point really? But that also comes at the expense of not paying people their due worth and incrementing below inflation rate.

But past returns do not guarantee future results. Stock markets ebbs and flows. It will take a blip, not even a crash, to impact those retirement accounts.

IMO this is a risky idea especially if there are jobs available.

If your retirement account is making more than 140k/year. You are probably in late stages of career, and of course have completely different incentives that also play into 'what's the point'.

If my retirement account was making more than my salary, then I'd also be asking myself 'what is the point' -> Regardless of inflation.

It sounds like either way you could just use a break. If you have a house and retirement is tracking inflation, you can use the time to reset and figure out a career change.

Up 4.2% (2.9% core, i.e. stripping out food and energy) over the last 12 months before seasonal adjustment.

The higher-frequency data are more concerning. CPI “increased 0.5 percent on a seasonally adjusted basis in May, after rising 0.6 percent in April” and 0.9 percent in March [1]. (0.3, 0.2, 0.3 percent for December, January, February, respectively.)

So a linear trend of 6% from March, closer to 9% if one extrapolates the March-April-May quarter. Almost all of that driven by food and energy. Core spiked to 0.4% MoM in April, but calmed down to 0.2% in May, on trend with pre-war numbers. It’s up 2.9% YoY, but trending a bit lower. (Looked at another way, we’ve already “booked” 2.5% of inflation for ‘26. If we continue at 0.5% MoM, we close the year +5.6%. Even if it drops to pre-war 0.2%, we’re still going to be +3.8%. Given the resumption of hostilities, I’m betting we’ll be closer to the former.)

Together with the jobs numbers, it would be weird for an independent Fed to not raise rates.

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

> Together with the jobs numbers, it would be weird for an independent Fed to not raise rates.

Not really. They may believe the inflation is driven by supply shocks, not excess demand. For example, the oil blockade. Raising already restrictive rates wont increase the supply of oil.

They don't even need to be right. If they simply believe this is what's driving inflation, they could decline to raise rates without that necessarily indicating a lack of independence.

Personally I expect the FED not to be independent and to let inflation run a little hot while lowering rates to attack the debt from 2 angles. But even still, its not true that high CPI + not lowering rates = non-independent fed

> They may believe the inflation is driven by supply shocks, not excess demand

Fair enough, I regret my edit. It would be unusualy for the Fed not to hold or raise rates.

Lowering rates, on the other hand, would be a clear WTF move.

Here are some N-year rolling total inflation charts to put this datapoint in a longer-term perspective: https://totalrealreturns.com/inflation . Zooming out always smooths the noise.

Simple, excellent data. Thanks.

This is so good Ty.

Basically, looking at inflation over time, we look pretty good here.

I am not sure what the perspective is: we aren't the same economy (there are true financial system differences between now and say, 1985) and, even if we were the same, the three other shocks that rise like this are two world wars and an oil crisis. This is some dunderding old narcissist thinking he's the toughest kid on the block. You could argue the oil crisis was a similar result of the US never, ever learning a lesson about intervening in others' political systems (especially if there's oil involved), but trend line or not, no one had to go through this.

And the trend line would bend differently if we could just learn the lesson.

And yes I am oversimplifying: the current conditions are actually do to a number of stupid things the current administration did because they assumed everyone who came before them was stupid and woke, but this just strikes me wrong, as though the chart should be comfort to someone struggling to make rent or pay for medicine or what have you. Much of this could have been avoided.

The "stupid and woke" thing is just marketing, they know exactly what they're doing.

> Prices are up +4.25% in the past year, and +24.49% in the past 5 years, according to the latest CPI data released Jun. 10, 2026. The price level has approximately doubled (2.01x) today compared to August 1999.

Not knowing if that's good/bad, as it is without any frame of reference, so the same data for Spain looks something like this:

Prices up +3.2% in the past year, up +22.4% in the past 5 years. Compared to 1999, a 1.88× difference, and if you want to compare since when it doubled, it'd be around September 1996. This is according to a tool from INE, Spain’s national statistics: https://www.ine.es/varipc/index.do?L=1

2% is good, anything over 3% is not good, anything over 4% is bad, 5% and higher is really bad. Hope that clears things up for you.

Can you really say that based only on the inflation? What if wages increased 6%, then 3% inflation wouldn't be as bad as if inflation raised 2% but wages only increased 0.1%? At least if you think about purchasing power I suppose. But won't claim to be an expert on this, happy to be educated by those who are :)

In general, higher inflation has a negative impact on consumer sentiment even if wage growth matches the inflation, which it rarely does.

But the bigger issue is that inflation is generally distributed much more evenly than wage increases. Very few employers offer a COLA that is automatic, so wages almost always trail inflationary pressure.

Part of it is just expectations btw. If the value of money is jumping up and down rapidly it is bad for business. Like if I'm going to sell you a 30 year fixed rate mortgage we require an accurate expectation of future inflation for one of us not to effectively lose their shirt on the deal. Imagine shops shuffling their prices up and down constantly, unions renegotiating contracts all the time, you sign up for 12 months of netflix but the price implicitly assumes that money will be worth N% less by month 12, etc. (imo a lot of these things should already be pegged, but people don't like doing that) It's basically just much more annoying to transact using a currency whose future value is unpredictable. So given that 2% is the stated target, which expectations are presumably largely built around, significant deviation is a failure to manage that process.

Why those arbitrary thresholds?

In complete seriousness:

An offhand remark made by New Zealand's Finance Minister, Roger Douglas, during a 1988 television interview.

The fed has a dual mandate to maintain full employment and keep inflation at 2%. Others have already explained why 2% and not 0%. Up to 3% is expected, 4% means significant price shocks and they should consider acting quickly. 5% means they are at risk of losing control of inflation as it's more than doubled from their mandate and the fed risks losing credibility with markets

> Why those arbitrary thresholds?

The broad idea is you want a number low enough that people don't price inflation expectations into day-to-day pricing but not so low that a hiccup causes deflation.

The empirical evidence around inflation persistence is a bit all over the place, but broadly suggests people start daily indexing between 2 and 5%. When that starts to happen, restraining inflation without causing a depression becomes incredibly hard, because people will actively countermand policy moves.

The FED says that 2% is good. 2% is not good. Their target of 2% per year means we have 2% compounding annually devaluation of our currency.

Why is that not good? When inflation is close to 0 real interest rates increase which causes the economy to slow down. It seems clear to me that the optimal rate of inflation is always above 0.

The real problem imo is that below 0% is really bad, and has the potential to spiral. So the fed does not target anything close to 0%, but instead targets some buffer above it.

So it's not that "2% is good", but more that "2% is the best buffer we've decided above the <0% super scary threshold"

Yes of course below 0% is especially bad, but I dont think thats the whole story. If central banks were able to set inflation with 100% certainty I still think targeting a number close to 0% is a bad idea. Nominal interest rates have a floor due to defaults, servicing costs. As inflation approaches 0 that floor is hit and monetary policy loses its ability to control real interest rates. Keeping nominal rates above their floor is key to ensuring small business can obtain liquidity, as the floor is approached it makes less sense for lenders to write small loans.

There are many other reasons a positive inflation rate is better than substantially near 0. One common complaint about inflation is that erodes real wages because nominal wages are sticky, but this is actually a good thing. It gives businesses room to breathe during downturns without cutting nominal wages or having to cut staff. Positive inflation also forces cash into productive uses which helps monetary policy because it keeps the actaul money supply more stable.

The Fed did a study some time back estimating CPI levels since 1800. [1] They found that from 1800 to 1950 the CPI never shifted more than 25 points from the starting base of 51, so it always stayed within +/- ~50% of that baseline. That's through the Civil War, both World Wars, Spanish Flu, and much more. And obviously the US economy increased in sized quite exponentially from 1800 to 1950, with no persistent inflation whatsoever.

It's even more interesting to contrast this from 1971 onward. 1971 is when Bretton Woods ended and the government was given a free hand to start 'printing money' so to speak, and inflation became the new policy. Since then the CPI has increased by more than 800 points, 1600% more than our baseline. And it's only increasing faster now - to the point that these numbers I'm giving are already rather outdated.

[1] - https://www.minneapolisfed.org/about-us/monetary-policy/infl...

The US economy faced repeated economic catastrophes from 1800-1950 largely because the government was unable to enact monetary policy. The long depression of the 1870s happened pretty much solely because monetary supply contracted and populists got elected to fuck with the silver/gold standard. Causes of the great depression are more varied, but contraction of money supply due is certainly one of the leading ones.

Yes, the economy expanded greatly over this period, but you have to separate inflation from many other causes such as innovation, increasing labor supply, better education, increases in the amount of investment. I think its pretty clear that the economy wouldve fared much better in the 1800-1950 period if the government was partaking in monetary policy that focused on small but positive inflation.

Check out the data from the Fed and contrast it against events in the past. For instance you mention the long depression which happened from 1873 to 1879 and resulted in a decline in prices of about 30% followed by stabilization. And of course that was also the advent of the Gilded Age, where economic growth, wages, and so on all were skyrocketing, all while prices trended downward! It's difficult to even imagine something like that now a days.

I don't think that's just a coincidence either. Economic issues in the US used to foreshadow booms to come, which makes sense in many ways as it's the ending of one generation of businesses and the start of another. By contrast in the US prices have increased by 30% over almost the same length of time as the 'long depression', and continue going up up and away. It'd be nonsensical to call it the long inflation or whatever because it's only slightly off the normal. 2% 'planned' inflation over the same 7 year period is a 15% increase in prices. And businesses going under? No, everything's huge now, and so everything's too big to fail. The government has taken on the responsibility of perpetually propping up failing businesses, forever inhibiting competition in the process.

And there's no boom waiting at the end, in no small part because there is no end. Each economic issue we face, which are becoming increasingly regular, just further magnifies the divides in society. The wealthy have sufficient assets and resources to turn this into profit, in no small part by dumping excesses of money into inflation resistant assets, but the middle and lower classes have no such option and so mostly just lose either badly or very badly. This [1] site lays out a bunch of the data since 1971 (when the dollar became completely unbacked following the end of Bretton Woods) and impossible not to see it as an enormous inflection point for all sorts of nasty stuff.

---

I suspect if we hadn't had the tech boom kicking off fairly shortly after 1971, driving in a decades long unprecedented economic boom, that this experiment would have long since reached its climatic failure. It only works with infinite exponential growth. For some time we had that. Now we not only no longer do, but also are seeing a fertility collapse at the same time. There's gonna be some fireworks.

[1] - https://wtfhappenedin1971.com/

It's fine as long as t-bill rates match or exceed inflation. Then you can avoid losing purchasing power by just putting your money in the world's safest investment. Over the past century, t-bill returns have slightly exceeded inflation on average, though there have been periods when they didn't.

Stash paper cash in your safe and sure, you lose purchasing power. Use fiat money the way it's designed to be used, instead of using it like gold coins, and it works better.

Us debt as a fraction of GDP has doubled this century and roughly quadrupled in my lifetime. It would seem to me that eventually t-bills will not be safe.

True, but that's a different problem and to hedge against that you probably need hard assets.

They did double and quadruple before, if you know what I mean.

That's by design.

If currency doesn't devalue then stuffing it under a mattress looks like a reasonable alternative to investing. If we hit deflation you can receive gains for "free" and borrowed money becomes more expensive over time. Neither of which our economic system is setup to handle.

We punish people who hoard cash by devaluing it thus encouraging them to put the money to work.

One side says this design is necessary to sustain growth. The other says it's unfair because the gains from the growth are unevenly distributed. Neither is wrong.

It depends on the country. Brazil, due to its hyperinflation days, has a lot of indexed prices. These are prices that automatically increase due to inflation. This makes the country to have so called inertial inflation, current inflation caused by past inflation, and also makes it more robust to a higher inflation.

Inflation isnt as simple as good/bad. Monetary theory shows us that short term inflation is a good way to counteract spikes in unemployment. Whether you prefer stable inflation with swings in unemployment or stable unemployment with swings in inflation or something in between is a political question.

Which puts central banks in a hard place right now because the problem is supply-side. The dual mandate is a lose-lose situation.

Do understand actual policy decisions: https://www.richmondfed.org/publications/research/econ_focus...

That shows that it’s been since 1991 since we saw similar five year increases in prices. Which is a long time. You also have to be careful not to zoom out so far you get into the “we all die anyway” scale where you’re not really tracking things that are meaningful to on-the-ground, as-lived reality

Noise is a lot better when it's centered around 0.

1918 isn't very relevant to modern living. And nobody wants to go back to the stagflation of the 1970s. And that scale is logarithmic.

Graph it without the logarithmic scale and draw a curve through the 1982-2018 data and the recent spike will explain why people are complaining about it.

Indeed. Back then food and shelter comprised a much larger % of the average income, and so each percentage point of inflation was considerably more painful than it is now.

Why is this logarithmic?

Because inflation compounds

Zooming out in what sense? Those rolling charts don’t mean much imo. Year over year change is a pretty good perspective and a tick up like this is not great.

Zooming out tells you this tick up to 4.2% is not nearly as bad as the post-covid inflation, and drastically better than the 70s. Not a good sign, but also not too far outside the historical mean and probably no need to panic in and of itself.

I don’t think that tells us anything. We already know 7% > than 4.2. This should already be a fact that inflation was worse during Covid.

I don’t think know that inflation was worse in the 70s helps fixes the narrative that 4.2% inflation is not good.

Obviously more inflation is bad almost always. The question is how bad. By looking at a graph, you can get a sense for the mean and standard deviation of inflation over time, and this looks to be a small deviation in the grand scheme of things. Of course, no one would call this good, but it's just good to put stuff like this in context.

Again I don’t think it says anything. Yes inflation was worse during Covid and before I was born, that just sounds silly btw. There is no perspective to be frank, energy is up a lot, that will impact other goods over the next few quarters.

Now overlay average income on top

Worse is coming and the markets seem to be in complete denial about it.

Oil has only really maintained the ~$100/barrel price because of record SPR releases worldwide. Also, that $100 price is kinda fake because it's a future price. The spot prices got much higher. Well, that runway is coming to an end. If the Strait of Hormuz re-opened today , we'd still be facing an energy shock. Plus there's famine coming.

Now the US won't run out of oil or refined petroleum products. The uS is now a net exporter. But it's a global marekt so the prices are going to go way up. And some countries and heavily dependent on oil for electricity. They are going to face blackouts.

So even though fertilizer shortages are skewed towards the Global South, food prices too are global so they're going up too.

In 1973, the energy shock took ~6 months to manifest [1].

But I think the real problem is dynamic pricing. Inflation is insidious. People start raising prices on the expectation of rising prices, thus causing prices to rise. But so many industries now are going well beyond that by essentially colluding through AI tools (eg RealPage) to further raise prices.

I honestly don't know how this ends without a deep, long recession.

[1]: https://paulkrugman.substack.com/p/oil-crises-past-and-possi...

> don't know how this ends without a deep, long recession

The same way Powell ended the last one without a deep, long recession.

You mean with the greatest wealth transfer to the wealthy in history that added a quarter to our entire national debt? Yeah, you can't do that often.

The US national debt is about to hit $40 trillion. It was $20 trillion 9 years ago.

What Trump and Biden should've done is implemented a windfall profits tax of probably 80%. But there's absolutely zero chance of that happening by either party.

> mean with the greatest wealth transfer to the wealthy in history that added a quarter to our entire national debt?

The national debt was added before the inflation took hold to counter the Covid recession. (When the MMT nutters were at the helm.)

Powell cured the resulting inflation without causing a recession. He did that without adding anything to our national debt.

> What Trump and Biden should've done is implemented a windfall profits tax of probably 80%

This just creates a political game of defining what is and isn't a windfall. A progressive corporate tax achieves what I think you want to without the side effects.

Either way, the playbook for getting out of this is steeply increasing rates and then moderating them before inflation hits target.

> Powell cured the resulting inflation without causing a recession. He did that without adding anything to our national debt.

That doesn't actually seem like a huge achievement. Inflation is the rate of change so if you stop creating as much money out of thin air, then it's not really a surprise that prices don't increase as much.

> That doesn't actually seem like a huge achievement

Historically, it has been.

> Inflation is the rate of change so if you stop creating as much money out of thin air, then it's not really a surprise that prices don't increase as much

You're confusing money supply and price levels. Inflation measures the latter. You can have constant money supply and stable prices, inflation or deflation. And since most money is privately created, controlling how much money is and isn't created "out of thin air" is actually quite challenging.

> You're confusing money supply and price levels.

They're closely related.

> And since most money is privately created, controlling how much money is and isn't created "out of thin air" is actually quite challenging.

It's the central bank which controls the interest rates, the reserve requirement and other stuff which affects it.

> They're closely related

But not the same. In this case, the difference is material.

> It's the central bank which controls the interest rates, the reserve requirement and other stuff which affects it

Affects. But does not control. That's what makes it challenging.

To my memory, a soft landing from 5+ percent inflation has been achieved precisely once in modern monetary history. (And not for lack of trying.)

When I was in high school I was a reckless driver, and with each narrow escape, I became more confident and certain that I was in control and a bad outcome wouldn't happen, couldn't happen. Your comment was downvoted with the same hubris. Success is not a teacher.

Prices have doubled since 1999!? Restaurant prices near me have doubled since 2015, easily. And that's not counting delivery going from free to 25% of the meal cost.

Not quite. The value of the currency has declined by 33% since 1999.

Prices are subject to the combination of the value of the currency and the value of the good. Food may be worth more than in the past, for example, so you cannot look at the value of the currency alone.

The value of the currency relative to an evolving bag of reference goods.

Value is always relative. Typically currency is what we use as the relative point of comparison, but obviously you cannot compare the value of the currency with the value of the currency. Hence why we flip things around. A bag of goods, as opposed to a single item, filters out the noise of each individual good changing in value independently.

Food is one of the things that's going to have the least change in value.

Quite the opposite. Value is essentially a function of scarcity relative to desire. Food desire may be, for all intents and purposes, stable, but availability is most certainly not. Something like a major weather event wiping out a crop can quickly change the scarcity profile. Food is especially prone to value variances over time.

What specific definition of value are you using here? Sometimes terms with value get into the same realm as price, but the default definition of value is the benefit you're getting, and going to similar restaurants ten years apart is damn near the same benefit. Scarcity doesn't come into play.

Given that we're specifically talking about value in the context of currency and how that pertains to CPI, I am not sure where "benefit you're getting" would apply. CPI is definitely not interested in "the benefit you got".

However, if we are to change gears, the benefit you get out of a restaurant isn't constant either. Aside from maybe those trying to serve the elderly population, where there seems to be a viable niche of providing "remembrance of how things were in the good old days", restaurants that try to offer constant value quickly go out of business. They are forever needing to up their game to appeal to the typical clientele. Customers want increasingly more benefit as time marches forward to justify the visit.

An individual's perception of benefit is personal, so it is true that any given individual may not find increased benefit in restaurants trying to outdo each other by offering more and more benefits, but within populations it seems quite apparent that restaurants that "win" generally are offering more benefits (higher quality/more exotic/creative food, increasingly sophisticated ambiance, etc.) than they did in the past.

> Given that we're specifically talking about value in the context of currency and how that pertains to CPI, I am not sure where "benefit you're getting" would apply. CPI is definitely not interested in "the benefit you got".

...yes it is? It's seeing how many dollars you need for some specific goods.

> the benefit you get out of a restaurant isn't constant either

It's not exactly constant but it's pretty close. Especially over a single decade. And we can assume here that people are going to similar restaurants.

No...? Price is what we use to "see how many dollars you need for some specific good".

To be sure, the P in CPI stands for price, but that doesn't mean it is the same thing as price. The C and I are also there to indicate that it is something else.

It's using a fixed value of goods and measuring the price of that basket to measure the value of a dollar.

The price of a dollar is one dollar. That's a useless statistic.

> It's using a fixed value of goods

The CPI basket is definitely not fixed. It is constantly evolving to ensure that the metric is useful. Consumption habits are not fixed.

> The price of a dollar is one dollar.

Technically true, just like the price of one iPhone is the price of one iPhone (assuming equivalent specs), but in the real world price is used to compare the value of different things. Currently, the price of an iPhone 17 Pro is 238 bushels of corn.

The basket shifts but it's trying to stay equivalent. Not in dollar terms but in benefit terms. If it's not trying to have a stable value then it's not a useful measuring stick.

Not in benefit terms, in buying habit terms. CPI tries to be calculated on a regular basis, and thus is only useful if it looks at things people are actually buying. If people used to regularly buy steak, but due to production issues there isn't much to go around, where customers have largely shifted to buying ground beef instead, then steak is no longer a useful item in the basket. It will get phased out in favour of ground beef.

Steak is objectively more valuable in the traditional sense, as evidenced by the price, and also quite arguably more valuable than ground beef in the "benefit" sense, but that doesn't matter. Ground beef is just as good in the basket as CPI only needs to see relative change in price. It is not measuring benefit.

Also, desire for restaurant service is driven by people with disposable income looking to treat themselves much more than baseline food prices. Restaurants serving this demand can optimise prices for their limited capacity, and have staff and real estate costs to consider

Pick your favorite crop and look at yields per acre over the last century.

If I have to look at an entire century I think that proves my point.

I mean looking at fold change, even full order of magnitude increases is pretty interesting.

It's CPI, they'll just keep changing the basket of goods until the numbers look like they want them to.

"Well, inflation since 2015 is nonexistent if you swap out steaks for 3 day old catfish and fruits for kool aid packets"

Yes restaurant prices have increased more but other things have increased less. For example entertainment, clothing, electronics, even automobiles.

Not all components rise in cost at the same time. Overall, prices have roughly doubled since the early 2000's--things that I expect to cost, say, $10 would now cost around $20. However, some things have risen in cost much more quickly: housing prices, for one.

The things you are talking about are a phenomenon largely of the COVID era and later. The biggest wage gains post-COVID have been in the lowest end of the job market, and services where almost-minimum-wage labor is a high fraction of their cost have commensurately risen in price the fastest (e.g., fast food). Similarly, a lot of the easy money flowing into unprofitable grow-then-make-money businesses (like delivery firms) have stopped flowing in, so those services have had to actually make money from customers, which causes their costs to rise.

Except for a brief spike during Covid unemployment has been below 5% for a long time which has led to more wage growth for cooks and waiters than for programmers.

Dining out is expensive because service workers got the biggest pay raise percentage wise after 2020.

Your food delivery was subsidized by doordash and uber and low interest rates. And let's be serious, do you seriously think you should not pay any extra to have a human drive half an hour to deliver a salad bowl to your home?

Restaurant prices near me have doubled since 2015, easily.

They track that too: https://fred.stlouisfed.org/series/CUSR0000SEFV

Looks like it's up about 55% in the last 11 years.

The worst part of this report is my diminished faith in the numbers.

Could you explain? What about this report pushes you toward not believing the numbers?

It’s not this report specifically but the other stuff the admin has done with the BLS.

It's unfortunately not limited to the current administration. We've had the government telling us to not trust our lying eyes about inflation at least since the Biden administration. At the time government officials were reassuring everyone that there wasn't inflation while everyone could see the prices going up everywhere.

BLS was not gutted then.

I have no love for Biden. I didn’t vote for him/kamala in the last election.

However I can also recognize that these two are not the same situation.

Not so much THIS report, but you can't trust any data that the Trump administration puts out after all the blantant corruption. Remember the Sharpie on the hurricane chart?

It's more the messenger than the message. Or in this case the people funding and staffing the messenger, and who desperately need this number to be as low as possible.

The current administration fires people leading BLS when it reports numbers they don't like, regardless of the merit of the numbers.

In an age when one opponent says "the economy is great!" and the other "the economy is doing terrible!", I just tune out and keep my own thoughts.

This kind of deliberate both-sides-ist ignorance is PRECISELY why those arguments work. You aren't being smart, you are giving your overlords permission to lie to you.

These are tractable (if complicated) questions with real (if imprecise and inevitably debatable) conclusions. Ignoring them because you don't like argument and are confused by the talking heads on the news is, to be blunt, destroying society.

You misunderstand. I shut my ears to their propaganda, not my eyes to real research and verified information. Then, I talk this way or that to friends/family, and vote accordingly.

Serious question here: Can we trust these numbers out of this admin? I've not been super plugged into the latest news out of the BLS, but I seem to remember a lot of political firings in the 'econ' part of the government.

I do not mean to be glib here either or start a flame war. I am genuinely asking.

It's currently headed by a pretty by-the-books guy, after a series of trump loyalists were rejected. Next up for nomination is another boring career professional, who actually pushed back against trumps bullshit and survived.

https://www.reuters.com/world/us/trump-nominee-head-bls-supp...

Whew! thank you!

considering Iran War is likely to still be happening January 2029, imagine what costs will be like by then

every single day $5/gas is taking a BILLION dollars out of the economy that could have gone elsewhere

but it could be worse, we could be innocent civilian Iranians having the US bomb their water and power plants this week

Remember this is the number the Government is measuring and reporting. The "real" inflation that every day people feel in their wallet is significantly higher.

Why is the government measured inflation not the same as real inflation?

Because people can’t internalize regional variance. So since the beginning of time, it’s not noticed when the national number is higher and fraud when it’s lower.

Ah, you're right. A broad, contrarian dismissal is exactly the way you should respond in any conversation related to CPI/inflation.

By the way, that coffee is $9. Sorry, Brazil tariffs and everything else - you understand.

There are legitimate complaints with CPI. The Reddit variety is mostly statistical illiteracy.

> that coffee is $9

Lots of coffee data [1]. One I think tracks a cup in a city is up 17% YoY.

[1] https://data.bls.gov/timeseries/APU0000717311&series_id=CUUR...

I think a broad, contrarian dismissal of a broad, contrarian dismissal of a metric is, while unhelpful, not inappropriate.

Because they basically pick and choose what's in there.

If you sat down and did the math on what it costs someone to pay rent / mortgage, car insurance, health insurance, daycare, schooling, going out to eat and drink, doing anything for entertainment, go to the grocery store.. it's not a debate that the real inflation is significantly higher all the time than what is used to measure the number.

But that’s exactly what the inflation measures of the BLS is - someone doing the math on what all these things cost.

Americans spend a significant portion of their income on food and fuel, which are excluded. Historically, these together accounted for about 15% of their income, probably up to 20% after recent price increases.

They are not excluded from CPI. You may be thinking of “core” inflation but the baseline CPI includes those.

It's mentioned in the lede paragraph...

> The index for energy rose 3.9 percent in May, after rising 3.8 percent in April and 10.9 percent in March. The energy index accounted for over sixty percent of the monthly all items increase.

All of the increase is from energy. Oil prices.

It's not just due to energy, at least not directly. Core CPI (ex-food and energy) has been increasing monotonically since February:

https://fred.stlouisfed.org/series/CPILFENS#

Per the link, food is up 3.1% and everything else 2.9%. So energy pulled inflation up from about 3% to about 4%, but that's not "all of the increase"

Energy going up drives evrything up, including food. Everything we do depends on energy in many different ways.

It's possible for energy to be behind the rises in other cost, but the data presented here gives no evidence for or against that possibility.

It obviously is part of the rises in other cost. We can argue how large a part, but I cannot imagine a world where they are unrelated

>Per the link, food is up 3.1%

But if you look at the sibling comment, all of that came from "Food away from home ". In other words, it's all because of takeout/restaurants, not groceries. Those were actually dragging inflation down.

How much of the food cost (and everything else) is tied to the increase in diesel prices? Do they adjust that out?

Distributor fuel costs are a really small part of the food price, with the notable exception of things that are bulky and full of air like Cheerios. The overwhelming fuel component of grocery consumption, by a margin so large you can consider it to be 100%, is the consumer's fuel. Driving 5 miles to an American grocery store to buy a few pounds of food is the most absurd scheme ever hatched. Having your groceries delivered by a van on a route is much more efficient but, perversely, by internalizing the last mile fuel cost that would show up as higher prices for food in aggregate inflation statistics.

I meant more in general. For food, what about fertilizer which has spiked?

That's a good question. If I was looking into it, I would look at farm gate prices for various farm products, that the USDA collects. For example, prices received for grains: https://www.nass.usda.gov/Charts_and_Maps/Agricultural_Price...

For your interpretation:

All items: +0.5% monthly; +4.2% year-over-year.

Energy: +3.9% monthly; +23.5% year-over-year.

Gasoline: +7.0% monthly; +40.5% year-over-year.

Fuel oil: +58.9% year-over-year.

Electricity: +0.6% monthly; +5.9% year-over-year.

Utility natural gas: -0.5% monthly; +3.0% year-over-year.

Food overall: +0.2% monthly; +3.1% year-over-year.

Food at home / groceries: +0.1% monthly.

Food away from home / restaurants: +0.3% monthly.

Nonalcoholic beverages: +0.6% monthly.

Cereals and bakery products: +0.4% monthly.

Fruits and vegetables: +0.2% monthly.

Dairy: -0.6% monthly.

Meats, poultry, fish, and eggs: -0.2% monthly.

Core CPI / all items less food and energy: +0.2% monthly; +2.9% year-over-year.

Shelter overall: +0.3% monthly.

Rent: +0.4% monthly.

Owners’ equivalent rent: +0.3% monthly.

Lodging away from home: +0.4% monthly.

Communication: +1.3% monthly.

Airline fares: +2.7% monthly.

Personal care: +1.0% monthly.

Recreation: +0.3% monthly.

Apparel: +0.3% monthly.

Used cars and trucks: +0.1% monthly.

Medical care: +0.3% monthly.

Hospital services: +0.7% monthly.

Motor vehicle insurance: -1.7% monthly.

Household furnishings and operations: -0.6% monthly.

New vehicles: -0.3% monthly.

Prescription drugs: -0.9% monthly.

At least raw milk is getting cheaper

Na, the hospital/medical care that comes along with it has gone up.

And eggs! Don't forget about the eggs!

My chicken tending has fallen to barely break-even on an EBIDTA basis.

Raw milk is hazardous

Some businesses use that as cover to increase prices even when their costs may not have actually been affected by the price of energy. Never waste an opportunity to put the big squeeze on.

Steadily rising prices will be the norm from now on. What will be interesting to see is how fast the corporate elite figure they can boil the frogs without them noticing too much.

$50.00 hotdog is coming.

This cannot be emphasized enough. The rise in egg prices was such a thing. Avian flu was an impact, but not to the degree that egg prices increased. Those producers are reporting record profits.

Is this of any significance? I would imagine most people are like me: we shop based on quality and price and where we want something on that curve. Whether someone raises the price on me “because of inflation” or “because we want to make more money” is indistinguishable.

A rationale for the price rarely affects my choice. If I don’t want to buy something for a price, explaining that the guy won’t be able to survive without pricing it that high won’t get me to buy it. If I do want to buy something for a price, explaining that a guy is charging a hefty profit won’t get me to not buy it.

The only thing that will get me to buy it or not buy it is if it is at the point on the price/quality frontier where I want it.

> A rationale for the price rarely affects my choice.

This would make you the exception. Companies are constantly increasing prices to see how much they can charge consumers before they feel cheated and stop buying and/or enough customers get priced out to hurt profits.

Consumers tend to feel ripped off if they think a price increase was due to greed but are way more forgiving if they think the price increase was needed because of something outside of a company's control. That's why companies are quick to tell consumers that rising prices are due to things like fuel prices, bird flu, or supply chain problems.

Of course, that tactic isn't as effective as it used to be since consumers have seen companies using those excuses and feed them lines like "We're all in this together!" while those same companies report skyrocketing profits and they've watched as prices remained high or even increased even after the blamed fuel prices dropped and supply chain issues resolved.

You're treating what the consumer believes and what is the case as if they were synonymous. How able is a consumer on the street to judge whether a price increase is legitimate or arbitrary? "Feeling ripped off" sounds more like a post hoc rationalization that's applied when a price is pushed just past the threshold.

"Feeling ripped off" is the immediate reaction to sticker shock. It takes active messaging from companies to get ahead of that reaction and plant in the mind of the consumer a justification that they'll think is fair. Companies have gotten very good about pushing their narrative to the public via social media, news, and even retail signage. Some companies have just outright lied about the reasons behind their price hikes or about how much they were actually impacted by real events, so what consumers are tricked into believing isn't always the truth.

Consumers typically have an idea of what something is worth though, usually based on previous prices. This isn't a problem when prices increase slowly because for every old person who thinks "What a scam! This used to cost 65 cents and now they want $1!" there is a child who never knew any better and for them the cost was always around $1. When prices increase too much or too quickly however that's when people get upset and assume greed unless they are primed to accept it with some excuse. This is especially true when consumers are struggling with high prices while hearing that the companies raising prices, switching to lower quality ingredients, or charging more while giving less are also making record-breaking profits.

When prices increase too much or too quickly however that's when people get upset and assume greed unless they are primed to accept it with some excuse.

Yeah, and then what do they do? I assume they don't stop buying groceries because they're pissed about the assumed greed. Do you really think people are switching grocery stores because they think Kroger is being greedy, but Safeway is altruistic and just raising their prices because of inflation?

They still need to buy food, but when the price of something goes up too fast they look for cheaper alternatives to what they normally buy or just stop buying certain things entirely. It's rare the cost for the cost of everything to spike all at the same time. It's happened before though when fuel prices were really high, it happened during the early days of the covid pandemic, and it's happening now with inflation being the excuse.

When the cost of everything goes up like it has now people actually do change their habits and shop at different stores looking for better prices (walmart, aldi, costco) when they have the option.

"More than 8 in 10 Americans changed how they buy groceries last year. They hunted for sales, switched to cheaper brands and stopped buying goods they once considered essential." (https://fooddrinklife.com/inflation-grocery-shopping/)

I don't get it. Do Americans not get inflation/COL corrections by default in their salaries? Inflation drives the price of everything up, including salaries. If that doesn't happen then it's not inflation, it's just salary cuts across the board.

A small number of companies control the meat supply in the United States. If you decide that you don't want to buy that $50 hot dog, you likely won't have many comparable options.

Agreed, which is one reason (there are others) why restaurants are disappearing.

https://50centadjustedforinflation.com/

50 Cent is up 1 cent to 113 Cent.

The worst part is that the 4.2% number is a floor on the actual inflation numbers. The US CPI has been lagging retail inflation for quite some time now (see 'hedonic regressions' by the BLS).

Yeah it's been gamed for a long time. Did you know teh inflation metric can actually go down when staples it tracks goes up?

Yup.

If steak is tracked and it doubles in price, they can adjust the basket weights to reflect what they assume consumers will do: buy less beef and more chicken instead. So if Q1 steak=10 and Q2 steak=20 they might change the weights so that it's essential comparing Q1 steak to Q2 chicken. Which may be cheaper than Q1 steak, thus reducing inflation despite steak doubling in price.

That doesn't strike me as a problem. It models what consumers actually do. The consumers are still being fed and they're suffering only a minor loss in their preference.

They don't keep any kind of hedonic measure, which might be interesting. If a consumer would rather have steak, but switches to chicken when it's over $10/pound, and then switches to tofu when chicken hits $10/pound, they're considerably less happy even if they're reasonably well fed.

You could probably use that to calculate some kind of hedonic metric: "I was originally willing to pay only $1/lb for tofu because it brought me 20% of the pleasure that a $5 steak would have." But you're not 80% less happy overall, since food is only part of your total happiness, so you'd need a "basket" of happiness.

What? No. How in the world would that be an honest reflection of economic health?

Even in your ideal scenario, if they switch to chicken. Compare the old price and new price of the chicken.

Under your model, if people stop buying toilet paper, there's a 100% REDUCTION in the price of toilet paper in the model. The economy must be great! And, what, do we only want to care that food got more expensive the moment people are starving to death or eating pagpag to survive?

> Yeah it's been gamed for a long time. Did you know teh inflation metric can actually go down when staples it tracks goes up?

I mean, a horse buggy ride has significantly increased in price relative to the 19th century, but if it were tracked as part of a basket of goods, it absolutely makes sense to replace it with the equivalent automobile taxi.

Yeah but I'm not arguing it's never necessary to change the weights.

Im saying if steak is in the index and it doubles in price the index should go up (all else being equal).

Is this with the new method of counting what inflation means? (trimmed mean, without outliers)

No, the new method of inflation that Kevin Warsh likes is the trimmed mean which is 2.8%.

Take on debt, as much as possible. Otherwise, inflation will end all. Inflation eats debt.

U.S. consumer wages index down -1% this past three months. also. We almost briefly started climbing positive in January, but nope, another 1% drop, sigh.

See also the +25% inflation / -1.2% net wages after inflation over five years chart here, for those unfamiliar with how inflation % press releases are misleading over time. If household spending power is -1% after +4% inflation, then that inflation probably isn’t healthy for your country’s economic future, etc.

https://www.statista.com/chart/32428/inflation-and-wage-grow...

(I also suspect the wage index itself is disguising about the total wages paid index dropping like a stone, but haven’t done the math to chart it yet myself yet.)

This is not inflation. The is a supply and demand issue. There are two factors: increasing energy costs due to the season and the rising costs of AI data centers (a big impact in my area). And secondly, the disruption of the oil supply during the continued Middle East conflict. These two issues have caused an energy price spike. Yes, it will eventually result in wide spread costs. But, as the components in the above report indicate, it is not yet spread widely. We are all sensitive to gas price fluctuations. We'd all be better off if we admitted that alternative fuels, other than nuclear, will never provide the requisite energy required to advance civilization. It's time to quit pretending that it will and start building nuclear power plants. Wind and solar farms are not the answer. And end the Iraq war aggressively. It's been nearly 50 years and it's clear that Iraq will never negotiate honestly. So Trump and his allies need to stop pretending and end it. And the same applies to the Ukraine-Russia conflict - no more US tax dollars to the Ukrainian dictator.

The Iran conflict will continue on a low flame (occasional pinpricks like now) forever.

It serves the US Energy Dominance Agenda against China, Japan, India and the EU.

The Trump administration does not care about "its" population. There were already rumors early in the Trump term that Trump would not mind a recession so that his real estate cronies could buy cheap foreclosures.

So it is all a double win for the oligarchs. The stock market is still fine, nothing else matters.

Absolutely hard Agree here. Thank you.

If this ends up being the case, 15 years from now we might look back at this as the catalyst for supercharging the energy transition across the world ex-US.

Might be wishful thinking, but I see this as the silver lining of the conflict

> I see this as the silver lining of the conflict

From what I can tell it’s also supercharging coal, particularly in Asia, e.g. India investing in coal gasification infrastructure [1].

[1] https://www.reuters.com/business/energy/india-clears-4-billi...

> It serves the US Energy Dominance Agenda against China, Japan, India and the EU

…how? What is this agenda? Juicing short-term energy exports? That’s not a “dominance agenda.”

The National Energy Dominance Council primarily cites national security interests:

https://www.eenews.net/articles/white-house-launches-energy-...

It works towards increasing US energy production at all costs even though the US is already a net exporter.

What is not mentioned of course is that increased US dependencies of countries like Japan are a feature:

https://energytracker.asia/japan-to-buy-record-amounts-of-ln...

That model, extort US investments and let Japan build US infrastructure in return for LNG was from 2025.

Now, with the Iran conflict, Qatar is shut off and Japan can be pressured even more.

> with the Iran conflict, Qatar is shut off and Japan can be pressured even more

I see your argument. It’s still short term. A fifth of Japanese electricity comes from renewables [1]. Meanwhile, Japan is diversifying its LNG suppliers [2].

[1] https://www.iea.org/countries/japan/renewables

[2] https://www.asahi.com/sp/ajw/articles/16464707

Switzerland imports 70% of its energy. All Oil comes from the U. S. https://www.swissinfo.ch/eng/energy-transition/where-switzer...

The EU relies heavily on U. S. oil imports https://www.consilium.europa.eu/en/infographics/where-does-t...

That doesn’t make sense. In the medium term this will strengthen efforts in China, Japan, India and the EU to move away from fossil fuel dependence much more quickly.

That is ascribing far too much strategic thinking to this administration. They're just not capable of the kind of planning and foresight that would require.

The administration's planning is much more along the lines of, Will this look cool when they announce it on Fox News tomorrow? If you think there's much beyond that, you're ascribing strategic clarity where there isn't any. They're continue to flail around and TACO until they have a result they can present to MAGA loyalists as a success, regardless of actual merits.

It's not a question of ethics. It's a question of competence.

It's not the administration doing the strategic thinking. The administration is entirely reactive and straightforward to manipulate -- if you have money.

The people with strategic goals just send money and compliments and the administration does what they want.

I mostly agree with you, but I do think they’re highly skilled at taking advantage of whatever messes they cause. “Chaos is a ladder” might as well be the theme of this decade.

I would not underestimate the figures in the background. Trump and Hegseth are clowns of course, but they don't make policies.

The energy dominance model was already floated by Trump in his first term. He was the most vocal critic of Nordstream long before the Ukraine war. Biden couldn't push so aggressively because of the green agenda but dutifully shut down Nordstream and made the EU dependent on US LNG.

Now with the oil barons in power, there are no green agenda limitations and the long term plan (which is 100% not from Trump himself) can accelerate.

Look how they already make the EU and Japan rearm with all these levers (they should rearm, but for the purposes of keeping waterways free from whomever blocks them ...).

> It serves the US Energy Dominance Agenda

I can believe the US/UK oil companies believe that.

It may even be true, because the energy transition caps the entire future opportunity for oil/gas sales, and all the producers have been trying to capture a larger share of that pie for the last 2 years or so.

But this intervention is so heavy-handed that it is visibly destroying that future market. It looks like all oil companies will lose a lot because of it, US/UK ones included.

> The Trump administration does not care about "its" population.

Yes, he's trying to govern like an oligarch. We will see in November if this was a good choice or if the US is still too democratic for this to work. Or earlier if he tries to avoid that test.

I've seen this strange theory pop up a few times but it makes absolutely zero sense.

For one even in the short term this is benefiting China as its the largest renewables producer in the world and much less exposed to ME fuels than Japan and America's allies, who are to put it in plain English, fucked. (Japan gets 80-90% of its resources from the Gulf, China ~15-20%)

Secondly the only thing that wakes the American voter out of his or her perpetual stupor is the cost at the gas station, and every single person responsible for this will be voted out of office. I cannot imagine that even the oil industry wants a blue wave just because they could crank the prices for a few months

Regressive consumer tax due to tariffs?

And gas prices

That was months ago. These days it's more likely to be from the Iran war and the Strait of Hormuz being closed, and what that did to energy prices.

The Iran war is for sure a huge part of that (just look at the energy cost inflation!), but other elements are a factor too. "Months ago" is really not that long when it comes to inflation.

Regressive consumer tax due to going to war with a country for no real reason

Shipping container rates were starting to stabilize, but the issues with the Straight have caused a 80%+ increase in the last few months.

https://www.drewry.co.uk/supply-chain-advisors/supply-chain-...

> Shipping container rates

With respect to those numbers, I remember this recent accusation of price-fixing across 2019-2021 [0] that might have an effect, although I also have reservations about how much to trust anything coming out of the rotting US Department of PresidentsPersonalLawyers these days.

[0] https://www.justice.gov/opa/pr/four-worlds-largest-container...

'No real reason' is the 2026 version of 'they hate our freedom'.

I find it interesting how many people act like inflation doesn’t exist especially with salaries.

If you made 100k in say 2000 the equivalent would be 200k today. If you go by median house price your salary should have doubled since 2015!

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