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"Official" inflation is based on the CPI, consumer price index, which is based on a basket of goods, not including CoL things like housing. edit: I stand corr

by titzer 6y ago

"Official" inflation is based on the CPI, consumer price index, which is based on a basket of goods, not including CoL things like housing. edit: I stand corrected. It does include housing, but this "Owners' equivalent rent of residences" counts the cost of a Mortgage, which of course is majorly impacted by interest rates. It doesn't include the value of the housing market directly, though. Does anyone actually think that the housing market is counted correctly? It is clearly outpacing inflation by a lot: https://dqydj.com/historical-home-prices/ https://dqydj.com/historical-home-prices/

trident5000 6y ago
CPI is a convenient basket for the fed to sell bonds ideally at a positive yield. Thats why things are left out.
- throw0101a 6y ago
  > for the fed to sell bonds The Fed does not sell bonds, the US government (through the Department of Treasury) does. They are independent of each other. (Then-President) Trump got lots of flack for going after US Fed Chairman Powell due to the desire to keep this independence as clear-cut as possible: * https://thehill.com/policy/finance/450283-powell-asserts-fed-independence-as-trump-blasts-central-bank https://thehill.com/policy/finance/450283-powell-asserts-fed...
  - trident5000 6y ago
    You are correct, I typed that too fast.
1915cb1f 6y ago
This is untrue. Housing is part of the CPI, and you can see everything that's included here: https://www.bls.gov/cpi/tables/relative-importance/2019.txt https://www.bls.gov/cpi/tables/relative-importance/2019.txt
dragonwriter 6y ago
> not including CoL things like housing. CPI includes both actual rents and imputed rents for home ownership. It doesn't include asset costs because it's a consumption price index, and doesn't measure additional costs to acquire non-consumption assets.
em500 6y ago
You probably need another correction: CPI does not count the cost of a mortgage, nor interest payments in any direct way. What the CPI estimates is the price of shelter, by surveying renters how much rent they pay, and house owners how much rent they think their house would rent for. It's a bit frustrating that there are so many misunderstandings around this topic, while the BLS has clear and extensive explanations on their website. https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
- chii 6y ago
  it's more that people have an innate desire to own (their residence). When they see prices of houses grow, they feel disenfranchised. They blame it on inflation - because to them, the house hasn't changed when its price grew.

by titzer 6y ago

trident5000 6y ago

CPI is a convenient basket for the fed to sell bonds ideally at a positive yield. Thats why things are left out.

throw0101a 6y ago
> for the fed to sell bonds The Fed does not sell bonds, the US government (through the Department of Treasury) does. They are independent of each other. (Then-President) Trump got lots of flack for going after US Fed Chairman Powell due to the desire to keep this independence as clear-cut as possible: * https://thehill.com/policy/finance/450283-powell-asserts-fed-independence-as-trump-blasts-central-bank https://thehill.com/policy/finance/450283-powell-asserts-fed...
- trident5000 6y ago
  You are correct, I typed that too fast.

1915cb1f 6y ago

This is untrue. Housing is part of the CPI, and you can see everything that's included here: https://www.bls.gov/cpi/tables/relative-importance/2019.txt https://www.bls.gov/cpi/tables/relative-importance/2019.txt

dragonwriter 6y ago

> not including CoL things like housing. CPI includes both actual rents and imputed rents for home ownership. It doesn't include asset costs because it's a consumption price index, and doesn't measure additional costs to acquire non-consumption assets.

em500 6y ago

You probably need another correction: CPI does not count the cost of a mortgage, nor interest payments in any direct way. What the CPI estimates is the price of shelter, by surveying renters how much rent they pay, and house owners how much rent they think their house would rent for. It's a bit frustrating that there are so many misunderstandings around this topic, while the BLS has clear and extensive explanations on their website. https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

chii 6y ago
it's more that people have an innate desire to own (their residence). When they see prices of houses grow, they feel disenfranchised. They blame it on inflation - because to them, the house hasn't changed when its price grew.