11 ms·

>But I keep hearing employment is great, productivity is great, stock market is great The question you have to ask is, who are you hearing this from? The answ

>But I keep hearing employment is great, productivity is great, stock market is great The question you have to ask is, who are you hearing this from? The answer is: people with a vested interest in making you believe the economy is doing great, or people fooled into believing this by those with a vested interest. I suggest you closely examine the metrics used by those who claim the "economy is great". First these metrics are usually comparing year-over-year changes to point to "positive changes" in the economy. What they fail to announce is that the formulas they use to calculate these metrics are "adjusted" regularly to ensure that the numbers they seek are reflected. CPI is a perfect example. The FED claims that inflation has been very low, if not non-existent for years (good for workers, since their wages have fallen or remained stagnant for decades). Some have noted, however, that prices for most of the things people need to survive (food, rent, education, healthcare, insurance) continue to rise dramatically. How can this be? Well one way the FED lies with their numbers is through a mechanism called the "hedonic adjustment". If you paid $2 for a roll 60-sheet roll of toilet paper last year. This year you paid $3 for a 60-sheet roll this year, that's some serious inflation, right? Not according to the FED. The FED claims that the quality of the toilet paper is better now. Even though you are paying 50% more, the FED says the toilet paper is 50% better, so there is no inflation. How are these "hedonic adjustments" calculated? Arbitrarily by FED functionaries, in a black-box. Rising debt, falling and stagnant wages, higher prices, consolidation of wealth - these are the real conditions we face and why our economy is lagging. Many will look at you as if you are wearing a tinfoil hat if you question the "official numbers", but even casual scrutiny of the methods and metrics used (the ones they do release) will raise substantial doubts about their worth.

jxramos 9y ago
I dream about the day when the CBO and the Fed lay out all their calculations in a Jupyter Notebook and some means of accessing the raw data used. I can smell the transparency there.
- thadk 9y ago
  I haven't looked into this carefully but I believe the UK does this already in R: https://twitter.com/Rbloggers/status/846887304379744259 https://twitter.com/Rbloggers/status/846887304379744259
linkregister 9y ago
That is an interesting anecdote, delivered with lots of confidence. However, despite the just-so manner you delivered it, I don't see a compelling argument. For starters, the CPI isn't calculated in an opaque manner; it's explained here: https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf. The costs that are increasing for most Americans are housing, healthcare, and education costs. Yet over 40% of American households own their primary residence. Then you can factor in the lack of rent growth away from urban centers, and you see that this metric isn't as pronounced when it comes to the median American. The costs of many goods are falling. Commodity prices are low despite the fact there is a healthy demand for them. It's strange that you're calling out toilet paper. Its price has fallen [1]. The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2] The unemployment numbers being released should be viewed with skepticism, and there are plenty of good articles explaining why the main unemployment rate should be viewed in context with the other unemployment metrics, such as U6. (The idea is that there are many people who want to work who aren't counted in the main unemployment statistic.) Furthermore, certain localities are experiencing extremely high price increases in housing, such as the Bay Area. Anyone in such a locality is going to feel the squeeze. The problem is that these statistics represent the nation, not individual localities. 1. https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf, page 12; table 2: Household paper products. 2. https://www.bloomberg.com/view/articles/2017-09-26/yellen-knows-enough-to-admit-what-she-doesn-t-know https://www.bloomberg.com/view/articles/2017-09-26/yellen-kn...
- candiodari 9y ago
  > The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2] So you're saying these people with all the humility required to announce they have solved economic crises for at least a lifetime [1] wouldn't lie or deceive themselves ? I wouldn't make that point. Seems unlikely that hubris like that would be limited in any way. Central banks have a long history of ... well, either outright lying or incredible self-deception, including the federal reserve under this chair. [2] No sane person at this point believes the FED's economic predictions. To make the difference I would put forth this point: finding analyses that defend the point that the US government (and indeed almost all governments with pension obligations) would be bankrupt in 2 year with a 4% funds rate and 6% inflation is easy. In other words, the FEDs predictions, if implemented, would blow up governments, make them bankrupt. Not just the US government (in fact the US government can probably last longer than the EU or Eastern European governments). I agree with that assessment. Maybe they can make it 3-4 years, but certainly no more. So in order to believe the FED's predictions and stated reasoning are honest (same with ECB) you have to believe that somehow it escaped the attention of these finance industry 4, 5 and 6 decade veterans that this would cause a financial disaster worldwide. I find it hard to believe that these people are this stupid. I also do not believe the FED would destroy the government it's part of. So I present to you: they are lying. They are lying about their reasoning, they are lying about their models, they are lying about their predictions. I understand why they're lying, but they're still lying. They are lying about the CPI too. European inflation measures are similar, as they directly influence pension increases, and "surprisingly" they're very low. [1] https://www.reuters.com/article/us-usa-fed-yellen/feds-yellen-expects-no-new-financial-crisis-in-our-lifetimes-idUSKBN19I2I5 https://www.reuters.com/article/us-usa-fed-yellen/feds-yelle... [2] https://mises.org/sites/default/files/styles/full_width/public/ffr%20ffs%20_0.jpg?itok=BMkl6NOU https://mises.org/sites/default/files/styles/full_width/publ... http://www.investmentoffice.com/show_image.php?file_id=2151 http://www.investmentoffice.com/show_image.php?file_id=2151 http://ei.marketwatch.com//Multimedia/2016/09/28/Photos/NS/MW-EW768_FEDDBI_20160928103202_NS.jpg?uuid=529d187a-8588-11e6-87d3-00137241c023 http://ei.marketwatch.com//Multimedia/2016/09/28/Photos/NS/M...
trts 9y ago
"Hedonic adjustment" is meant to control for the 'quality' of some (limited) products sampled in the CPI such as rent, computers and automobiles. 'quality-adjusted' means that they run a standard linear regression across the features of sampled items to normalize the variation in the sample. For example, the sampled rent of apartments would be modeled as (in the simplest example I can think of) : y = rent, b = slope, x = sqft y ~ b + x is the extent of the 'hedonic adjustment' There don't really exist any control variables for 'better'. Nobody at CPI is subjectively saying toiler paper is better. What they will stochastically estimate is the per-unit price. So if for $10 you get 9 double roles, and last year you got 9 single roles for $10, then the price went down. But I assure you as someone who has looked at row-level data of what the CPI samples and does, there are no cases that are this extreme in the aggregate. They could drop the hedonic adjustments and it would make no practical difference. Private companies use similar sampling methods with better data and don't show wildly different headline inflation (see: Billion Prices Project http://www.thebillionpricesproject.com/ http://www.thebillionpricesproject.com/) There is no doubt however that the CPI data is inadequate, has a non-trivial lag, and does not capture true regional differences in prices. Just try using it to adjust your salary if you move from Birmingham to New York City and see how comfortable you'd be. But there is no conspiracy; that would presume far more competency than they have hired for.
- LolWolf 9y ago
  > But there is no conspiracy; that would presume far more competency than they have hired for. This seems to be the case almost universally, but I guess it's easier to jump to the 'malice' conclusion than to attribute it to lack of competency. Perhaps more succinctly: if you think the world is out to get you, then it is.
  - thephyber 9y ago
    > But there is no conspiracy People want structure and simplicity in the world. They want to believe someone is in control, even if that someone is harming them.
    - 9y ago

jxramos 9y ago

I dream about the day when the CBO and the Fed lay out all their calculations in a Jupyter Notebook and some means of accessing the raw data used. I can smell the transparency there.

thadk 9y ago
I haven't looked into this carefully but I believe the UK does this already in R: https://twitter.com/Rbloggers/status/846887304379744259 https://twitter.com/Rbloggers/status/846887304379744259

linkregister 9y ago

That is an interesting anecdote, delivered with lots of confidence. However, despite the just-so manner you delivered it, I don't see a compelling argument. For starters, the CPI isn't calculated in an opaque manner; it's explained here: https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf. The costs that are increasing for most Americans are housing, healthcare, and education costs. Yet over 40% of American households own their primary residence. Then you can factor in the lack of rent growth away from urban centers, and you see that this metric isn't as pronounced when it comes to the median American. The costs of many goods are falling. Commodity prices are low despite the fact there is a healthy demand for them. It's strange that you're calling out toilet paper. Its price has fallen [1]. The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2] The unemployment numbers being released should be viewed with skepticism, and there are plenty of good articles explaining why the main unemployment rate should be viewed in context with the other unemployment metrics, such as U6. (The idea is that there are many people who want to work who aren't counted in the main unemployment statistic.) Furthermore, certain localities are experiencing extremely high price increases in housing, such as the Bay Area. Anyone in such a locality is going to feel the squeeze. The problem is that these statistics represent the nation, not individual localities. 1. https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf, page 12; table 2: Household paper products. 2. https://www.bloomberg.com/view/articles/2017-09-26/yellen-knows-enough-to-admit-what-she-doesn-t-know https://www.bloomberg.com/view/articles/2017-09-26/yellen-kn...

candiodari 9y ago
> The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2] So you're saying these people with all the humility required to announce they have solved economic crises for at least a lifetime [1] wouldn't lie or deceive themselves ? I wouldn't make that point. Seems unlikely that hubris like that would be limited in any way. Central banks have a long history of ... well, either outright lying or incredible self-deception, including the federal reserve under this chair. [2] No sane person at this point believes the FED's economic predictions. To make the difference I would put forth this point: finding analyses that defend the point that the US government (and indeed almost all governments with pension obligations) would be bankrupt in 2 year with a 4% funds rate and 6% inflation is easy. In other words, the FEDs predictions, if implemented, would blow up governments, make them bankrupt. Not just the US government (in fact the US government can probably last longer than the EU or Eastern European governments). I agree with that assessment. Maybe they can make it 3-4 years, but certainly no more. So in order to believe the FED's predictions and stated reasoning are honest (same with ECB) you have to believe that somehow it escaped the attention of these finance industry 4, 5 and 6 decade veterans that this would cause a financial disaster worldwide. I find it hard to believe that these people are this stupid. I also do not believe the FED would destroy the government it's part of. So I present to you: they are lying. They are lying about their reasoning, they are lying about their models, they are lying about their predictions. I understand why they're lying, but they're still lying. They are lying about the CPI too. European inflation measures are similar, as they directly influence pension increases, and "surprisingly" they're very low. [1] https://www.reuters.com/article/us-usa-fed-yellen/feds-yellen-expects-no-new-financial-crisis-in-our-lifetimes-idUSKBN19I2I5 https://www.reuters.com/article/us-usa-fed-yellen/feds-yelle... [2] https://mises.org/sites/default/files/styles/full_width/public/ffr%20ffs%20_0.jpg?itok=BMkl6NOU https://mises.org/sites/default/files/styles/full_width/publ... http://www.investmentoffice.com/show_image.php?file_id=2151 http://www.investmentoffice.com/show_image.php?file_id=2151 http://ei.marketwatch.com//Multimedia/2016/09/28/Photos/NS/MW-EW768_FEDDBI_20160928103202_NS.jpg?uuid=529d187a-8588-11e6-87d3-00137241c023 http://ei.marketwatch.com//Multimedia/2016/09/28/Photos/NS/M...

trts 9y ago

"Hedonic adjustment" is meant to control for the 'quality' of some (limited) products sampled in the CPI such as rent, computers and automobiles. 'quality-adjusted' means that they run a standard linear regression across the features of sampled items to normalize the variation in the sample. For example, the sampled rent of apartments would be modeled as (in the simplest example I can think of) : y = rent, b = slope, x = sqft y ~ b + x is the extent of the 'hedonic adjustment' There don't really exist any control variables for 'better'. Nobody at CPI is subjectively saying toiler paper is better. What they will stochastically estimate is the per-unit price. So if for $10 you get 9 double roles, and last year you got 9 single roles for $10, then the price went down. But I assure you as someone who has looked at row-level data of what the CPI samples and does, there are no cases that are this extreme in the aggregate. They could drop the hedonic adjustments and it would make no practical difference. Private companies use similar sampling methods with better data and don't show wildly different headline inflation (see: Billion Prices Project http://www.thebillionpricesproject.com/ http://www.thebillionpricesproject.com/) There is no doubt however that the CPI data is inadequate, has a non-trivial lag, and does not capture true regional differences in prices. Just try using it to adjust your salary if you move from Birmingham to New York City and see how comfortable you'd be. But there is no conspiracy; that would presume far more competency than they have hired for.

LolWolf 9y ago
> But there is no conspiracy; that would presume far more competency than they have hired for. This seems to be the case almost universally, but I guess it's easier to jump to the 'malice' conclusion than to attribute it to lack of competency. Perhaps more succinctly: if you think the world is out to get you, then it is.
- thephyber 9y ago
  > But there is no conspiracy People want structure and simplicity in the world. They want to believe someone is in control, even if that someone is harming them.
  - 9y ago