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Comment by revelation | Hacker News Reader

$100 are about $650 in todays money [1].

[1]: http://www.wolframalpha.com/input/?i=100%24+from+1969

It's actually a lot more. 4.31% per year is likely what the US government reports. They traditionally under report inflation (although to a greater degree over the past 20 years). The bundle of goods used to measure inflation does not include housing and energy, which have been the primary sources of rising living costs (not to mention medicine, which I only just considered).

What is the point of tracking inflation if you're not going to account for what's actually reducing (or increasing) the purchasing power of your currency?

"But he has nothing on!"

Because it doesn't work in the government's favor and makes the deficit higher.

Citation please.

First, the CPI absolutely does include housing, energy, and medicine[1].

Second, it's incredibly hard to accurately measure such a nebulous concept as inflation (because there's no such thing as a "general price level"), but it's pretty bold to definitively state that the CPI understates inflation. Measuring inflation is hard. We can buy an iPhone 5 for half what we paid for the first one in 2007--how do we quantify that price change in the CPI? Does a 2013 vehicle that costs the same as its 1995 counterpart represent high or low inflation? It's not just prices that change--quality changes and spending behavior changes. And then we have to take the wildly changing behavior of 300 million consumers, buying god knows how many products, and consolidate that into a single number.

Then that single number has to stand up to those same 300 million people, each of whom is biased by 4 billion years of evolution to be loss averse, to notice bad changes and grow accustomed to good changes, and, inevitably, lots of them will point to things that are much more expensive, unconsciously blind to all the things that have gotten cheaper, and claim that the CPI understates inflation.

[1] http://stats.bls.gov/cpi/cpifaq.htm#Question_7

OK, I'll bite. Name 5 products or services that have significantly improved in quality at constant cost, or declined in USD price at constant quality, over the past 10 years (excl. high-volume offshored consumer electronics, which of course I'll grant you).

[I tried pretty hard myself and all I came up with was, possibly, clothing].

Cars. TCO has dropped a lot due to maintenance costs dropping. Mean household size has also declined steadily for 3 decades. We choose to have more space and nicer things rather than work less.

(I kind of took the 'ten years' thing and ran it back to when I was young, in the 80s and 90s, sorry. :-))

I don't think I ever have to change the oil in my car over the duration of my lease. Synthetic lubricants, tighter tolerances, and better seals are amazing.

Plus, at what other time could you get a 400+ hp car that can get 26+ mpg? The safety features are insane. The wipers and lights come on automatically and the car buzzes (or so I am told) if I drowse off behind the wheel. I can listen to punk rock in the middle of Wyoming, but I won't have to because my car will plot a route around it.

Clothing has gotten much better for less, but that's largely global supply chain. I checked into a hotel in China and my room had a pair of throwaway trainers for walking in the city.

I can safely fly between any points in Europe with the change left over from a beer.

I can walk into an optometrist and get a box of contact lenses for my astigmatic eyes and wear a clean, new pair every day, all for less than hard lenses cost decades ago and for which I would have to wait weeks with multiple fittings. And they still sucked, especially in a windstorm.

Bicycles that would be insanely futuristic when I was a kid, with disc brakes, aluminum frames, and more gears than I need, cost the same as my hunk-of-steel Schwinn.

Bread! Coffee! They are so good now!

Best of all, my toilet cleans me.

The BLS says that prices have increased about 3% every year since 1993. Many people claim that this estimate is obviously too low. I'm claiming that it's reasonable. To test my claim, you suggest naming products or services that have increased in price by 0% or less, cumulatively, over the last 10 years. That's not a good test of my claim.

"Let them eat iPad"

http://www.forbes.com/sites/afontevecchia/2011/03/11/ny-feds...

If it's so hard to calculate, perhaps the government - and the bank cartel - should stop doing it and leave it and our currency the fuck alone?

> 4.31% per year is likely what the US government reports. They traditionally under report inflation (although to a greater degree over the past 20 years).

Quite the opposite, in fact.

The US government has traditionally overreported inflation, because the CPI was not hedonically-adjusted until the year 2000.

The Billion Prices Project at MIT provides an independent measure of inflation, and it tracks the CPI quite well. (Note, though that Billion Prices uses a different basket that does not include services. Thus, it will not match exactly.)

No. It is $3323.

  1oz gold coin price in USD:
  1969 40
  2013 1362

Last I checked, gold makes a poor meal.

You are taking the value of a tangible asset from 1969 and comparing it to todays value of said tangible asset. This in no way illustrates the inflation rate. All it shows (assuming your numbers are right) is the increase in the perceived value of gold in that time frame. The original comment's $650 number is close enough to be considered accurate

What's the distinction between "perceived value" and just normal value?

Little but that's sort of a distraction to the main point of the discussion. Using gold is no more helpful than say using the price of a barrel of crude oil then and now.

Interestingly, using crude oil gets you about the same results as gold. The figures above show a 34x nominal increase in the price of gold, while crude oil over the same period went up 32x.

Maybe poor choice in words, but the point is no one asset can be counted on to directly monitor inflation.

Using the gold example- suppose industrial demand for gold to fuel the semiconductor industry tripled the price of gold compared to 1969. Now suppose the price of milk, bread, gasoline, electricity, water, clothing, and alcohol only doubled in price compared to 1969. If inflation is a measure of your purchasing power IN GENERAL (not your purchasing power of gold), inflation was roughly 200%, no?

If gold had absolutely no practical value by itself, it would be free of market demands like that in my example. But of course then its value would have no connection to purchasing power, and we're right back where we started.

If you use Milton Friedman's (IMO, most-correct) definition of inflation as 'expansion of the currency supply' then Gold has actually tracked USD inflation extremely well, and the rate is far higher than the CPI.

Dictionary says "Inflation: a general increase in prices and fall in the purchasing value of money."

A lot of other tangible assets were dramatically cheaper in 1969.

Umm.. No.

An ounce of gold is traditionally viewed as a months wages. And it hasn't changed much but there are some fluctuations.

Interest rates and inflation are artificial constructs that are fiddled with to screw you out of your money.

I wasn't alive back then, but I think most full-time workers in USA made more than $40/month in 1969.

In 1969 my father supported 2 kids and a wife that did not work, owned a house and ONE car on $100 a week. I think $100 a week in 1969 is roughly equal to $125k per year.

According to the U.S. Census, the average household monthly income in 1969 was about $700 a month.

Why is the price of gold more relevant than the Consumer Price Index?

both are terrible measures, as a long-term measure gold isn't so bad, but for point-to-point comparisons (as is done in the parent post), gold goes through some crazy speculative bubbles. The CPI is dastardly manipulated figures. (hedonic adjustments, substitutions)

We all know that the Big Mac Index is the proper way to measure differences in money value. Assuming the Big Mac was still 45 cents in 1969 (as it was when it was introduced in 1967), and using The Economist's average US price of $4.56 for 2013, we get a roughly 10x increase, so it's worth about $1,000 today.

That's substantially different from the CPI-based value. I wasn't quite expecting that.

McDonalds claims that the Big Mac cost 49 cents at introduction. [1]

Also, imports have helped to keep inflation low. The Big Mac cannot be imported. Thus, you would expect it to show a higher rate of increase than overall prices.

Source:

[1] http://www.mcdepk.com/piratesofthecaribbean/mediadocs/big_ma...

> The CPI is dastardly manipulated figures. (hedonic adjustments, substitutions)

That's not manipulation. That's just trying to calculate an accurate number.

If you do no substitutions, then you will end up being a Collectible Goods Index, rather than a Consumer Goods Index. It makes no sense to calculate inflation in 2013 based on a basket of goods from 1919.

But that creates another problem. If you do no hedonic adjustments, then you will overstate inflation if consumers move upmarket. It's not the prices that went up -- it's consumer purchasing habits.

I'm not suggesting there is a good way to measure inflation. But there is no objective way to make these adjustments. To suggest that the official adjustments are better for some reason is just a stealthy appeal to authority.

$640 is correct. The price of gold (or artwork, or diamonds, or oil, or whatever other single item you may choose) is not an accurate proxy for the cost of living.

Stated differently: there is more to life than buying gold.

Incorrect, it is worth approx $0.

Data General NOVA: 1969 $8000 2013 ~$0

$100 * ($0 / $8000) = $0

Nah, it's really worth $110,150, since you could have held on to the $100 for two years, then bought into Intel's IPO which would result in 5,000 shares held today due to subsequent splits, which are currently going for $22.03 each.

I first tried this exercise with oil instead of gold, but the price change over the period in question is nearly identical. I doubt it means anything, but I thought it was interesting.

Here is a crazy theory: Say you have a really big oil field. Really really big. Unimaginally huge wealth flows in every day because the world wants, nay needs this modern lifeblood. How do you store that wealth. Do you stack IOU's from those countries in the form of currency? Nah. They will just inflate the currency to pay you back after they burn up all that precious oil? How about you just meter out enough oil to meet your life needs? Nah, they'll call your country a terrorist axis of evil and invade to help the oil flow.

ok how about this. How about you do a deal and pump as much oil as possible as long as you can exchange it for something real. and you have a long time cultural affilation for a yellow shiny metal. yeah that will do. How about we do a deal. We keep the oil pumping as long as we can exchange a ratio of oil barrels for this shiny metal. When the oil runs out in a hundred years or so we will have a stack of shiny metal to trade back.

More reading at this blog: http://fofoa.blogspot.com.au/2009/08/call-of-century.html

The gold "price" prior to 1971 was a pegging set by central banks, only adjusted slightly every couple of years. A "free price-fluctuating world market for gold" as we today know it only exists since the 70s. (Some argue we're still under central bank-managed price pegging, just "smarter" but let's not go there...) Rendering your point pretty useless.

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