5 ms·

I have a pet theory that we've been systematically under-estimating inflation for the past many years, and that all these sky-high market caps are really the re

by zeveb 9y ago

I have a pet theory that we've been systematically under-estimating inflation for the past many years, and that all these sky-high market caps are really the result of the dollar not being worth as much as we all think. Don't really have numbers behind it, other than things like a 12-pack of craft beer almost doubling over the past decade.

dnadler 9y ago
> other than things like a 12-pack of craft beer almost doubling over the past decade That's the thing about inflation, you need to look at a large basket of goods to estimate it. Different people feel price increases differently depending on what they buy. It's the aggregate number that matters at the end of the day.
- deleted 9y ago
  [deleted]
- opportune 9y ago
  Right. Commodity resources have pretty much universally decreased in price (relative to average income) as countries develop. The same can not be said for other areas such as housing and medical care. In fact the government's refusal to incorporate housing costs into conventional CPI calculations has been widely criticized as under-estimating inflation. As current official inflation metrics indicate that median incomes have stagnated over the past couple decades, this would suggest that they have in fact fallen. That's why life seems tougher now even though things like food and cheap plastic toys are cheaper than ever However, a decent counterargument is that since rents are already incorporated into CPI, adding housing prices would be a confounding variable more susceptible to different macroeconomic trends such as equity market inflations. Still, since a sizable percentage of people own houses and an even greater percentage want to own one in the future, I think it's a reasonable metric to add
  - maxerickson 9y ago
    Housing is something like 1/3 of CPI.
    - opportune 9y ago
      rents, not house prices, unless I'm mistaken
      - maxerickson 9y ago
        Yes, that's "housing". It factors in the housing value of owned homes. (If you pay $1500 a month to buy a house where you could rent the equivalent for $1200, is the extra $300 really a cost of living in that area?)
      - xkjkls 9y ago
        Rents and house prices are heavily correlated.
maxerickson 9y ago
Where? In the Midwest craft beer prices went up moderately (but availability of 12 packs is kind of a new thing). Anyway, six packs were $8 and now they are $9, or something like that.
sneak 9y ago
The [core] CPI very conspicuously omits food and energy costs. Edit: added [core]
- burlesona 9y ago
  Do you know if housing is included? Seems like if you tracked inflation as more of “indexed cost of living” it would be skyrocketing the last 20 years.
  - maxerickson 9y ago
    Yes, rent is included, along with a computed rent for owned homes (they try to separate the housing value from the property value).
    - deleted 9y ago
      [deleted]
- mobilefriendly 9y ago
  From BLS, CPI basket is " eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services)." https://www.bls.gov/cpi/questions-and-answers.htm#Question_1 https://www.bls.gov/cpi/questions-and-answers.htm#Question_1
- gruez 9y ago
  >The CPI very conspicuously omits food and energy costs. a 15s google search says no: https://www.cnbc.com/id/43769766 https://www.cnbc.com/id/43769766 >The CPI measures costs in these areas, according to the BLS: > Food and Beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
- Analemma_ 9y ago
  This is not true. There is no single "CPI": the BLS actually calculates multiple indices. "Core CPI" excludes food and energy, but other indices include them. Some reporting organizations might use "Core CPI" when reporting inflation and not mention this, but that is their fault, not the fault of the index.
drak0n1c 9y ago
Craft beer isn't a good staple to base price measurements on, the industry is affected by regulations that other industries don't have to bear (liquor tax, compliance regulations, etc). Also craft beer is susceptible to fads and popularity, so it can experience "fashion pricing".
- xkjkls 9y ago
  Tren Griffin was using the craft beer revolution to point out the absurdity of certain measures of GDP and productivity recently: https://twitter.com/trengriffin/status/975077311857950721 https://twitter.com/trengriffin/status/975077311857950721 When will the American hipsters craving hoppy IPAs ever think about the economist's productivity statistics?!
Monkeyfume 9y ago
You may be more right than you know. See Kevin Philips' "Numbers Racket", May 2008 issue of Harper's Magazine, and/or other insights on the consumer price index methodology and inflation.
xkjkls 9y ago
There's alot of research that goes into this, not just the CPI but other measures of inflation. Check out http://www.thebillionpricesproject.com/ http://www.thebillionpricesproject.com/ from MIT. Economists don't just sit on their butts all day.
lifeformed 9y ago
Well, the demand for craft beer has gone up significantly in the past decade.

by zeveb 9y ago

dnadler 9y ago

> other than things like a 12-pack of craft beer almost doubling over the past decade That's the thing about inflation, you need to look at a large basket of goods to estimate it. Different people feel price increases differently depending on what they buy. It's the aggregate number that matters at the end of the day.

deleted 9y ago
[deleted]
opportune 9y ago
Right. Commodity resources have pretty much universally decreased in price (relative to average income) as countries develop. The same can not be said for other areas such as housing and medical care. In fact the government's refusal to incorporate housing costs into conventional CPI calculations has been widely criticized as under-estimating inflation. As current official inflation metrics indicate that median incomes have stagnated over the past couple decades, this would suggest that they have in fact fallen. That's why life seems tougher now even though things like food and cheap plastic toys are cheaper than ever However, a decent counterargument is that since rents are already incorporated into CPI, adding housing prices would be a confounding variable more susceptible to different macroeconomic trends such as equity market inflations. Still, since a sizable percentage of people own houses and an even greater percentage want to own one in the future, I think it's a reasonable metric to add
- maxerickson 9y ago
  Housing is something like 1/3 of CPI.
  - opportune 9y ago
    rents, not house prices, unless I'm mistaken
    - maxerickson 9y ago
      Yes, that's "housing". It factors in the housing value of owned homes. (If you pay $1500 a month to buy a house where you could rent the equivalent for $1200, is the extra $300 really a cost of living in that area?)
    - xkjkls 9y ago
      Rents and house prices are heavily correlated.

maxerickson 9y ago

Where? In the Midwest craft beer prices went up moderately (but availability of 12 packs is kind of a new thing). Anyway, six packs were $8 and now they are $9, or something like that.

sneak 9y ago

The [core] CPI very conspicuously omits food and energy costs. Edit: added [core]

burlesona 9y ago
Do you know if housing is included? Seems like if you tracked inflation as more of “indexed cost of living” it would be skyrocketing the last 20 years.
- maxerickson 9y ago
  Yes, rent is included, along with a computed rent for owned homes (they try to separate the housing value from the property value).
  - deleted 9y ago
    [deleted]
mobilefriendly 9y ago
From BLS, CPI basket is " eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services)." https://www.bls.gov/cpi/questions-and-answers.htm#Question_1 https://www.bls.gov/cpi/questions-and-answers.htm#Question_1
gruez 9y ago
>The CPI very conspicuously omits food and energy costs. a 15s google search says no: https://www.cnbc.com/id/43769766 https://www.cnbc.com/id/43769766 >The CPI measures costs in these areas, according to the BLS: > Food and Beverages (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
Analemma_ 9y ago
This is not true. There is no single "CPI": the BLS actually calculates multiple indices. "Core CPI" excludes food and energy, but other indices include them. Some reporting organizations might use "Core CPI" when reporting inflation and not mention this, but that is their fault, not the fault of the index.

drak0n1c 9y ago

Craft beer isn't a good staple to base price measurements on, the industry is affected by regulations that other industries don't have to bear (liquor tax, compliance regulations, etc). Also craft beer is susceptible to fads and popularity, so it can experience "fashion pricing".

xkjkls 9y ago
Tren Griffin was using the craft beer revolution to point out the absurdity of certain measures of GDP and productivity recently: https://twitter.com/trengriffin/status/975077311857950721 https://twitter.com/trengriffin/status/975077311857950721 When will the American hipsters craving hoppy IPAs ever think about the economist's productivity statistics?!

Monkeyfume 9y ago

You may be more right than you know. See Kevin Philips' "Numbers Racket", May 2008 issue of Harper's Magazine, and/or other insights on the consumer price index methodology and inflation.

xkjkls 9y ago

There's alot of research that goes into this, not just the CPI but other measures of inflation. Check out http://www.thebillionpricesproject.com/ http://www.thebillionpricesproject.com/ from MIT. Economists don't just sit on their butts all day.

lifeformed 9y ago

Well, the demand for craft beer has gone up significantly in the past decade.