3 ms·

CPI is a joke of a metric. Very few economists take it seriously.

by centimeter 6y ago

ForHackernews 6y ago
What metric would you prefer?
- trhway 6y ago
  my favorite is M3 https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S Edit: I thought it was obvious, yet in response to comment below - theoretically to get real inflation one has to adjust the M3 for the growth of the total amount of "stuff" in the economy. As that growth is just 1-2%/year , the M3 shape is visually indistinguishable from the real inflation on any given time period of up to several years.
  - ForHackernews 6y ago
    That's not a measure of inflation, it's just a measure of money supply.
    - georgeplusplus 6y ago
      inflation is defined as expansion or contraction in the money supply
      - ForHackernews 6y ago
        https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp > Inflation is the decline of purchasing power of a given currency over time. https://www.economicshelp.org/macroeconomics/inflation/definition/ https://www.economicshelp.org/macroeconomics/inflation/defin... > A more exact definition of inflation is a sustained increase in the general price level in an economy. Inflation means an increase in the cost of living as the price of goods and services rise. https://www.economicsonline.co.uk/Definitions/Inflation.html https://www.economicsonline.co.uk/Definitions/Inflation.html > Inflation refers to a rise in the average level of prices sustained over time, which also corresponds to a fall in the internal (domestic) purchasing power of money.
  - ForHackernews 6y ago
    In response to your edit, I don't know how you can claim that "real" (according to who? you?) inflation is somehow divorced from the purchasing power of a dollar. What matters to most humans is how far their wages go at the shop. Hand-waving at money supply and "total amount of stuff" without reference to prices makes as much sense as arguing "Well obviously daily commutes were shorter in 2019 than 1919 because cars are much faster than horses. Just look at my chart of relative top speeds!"
    - trhway 6y ago
      You forgot the second part - the total miles commuted. The same is inflation - faster growing total money divided by slower growing total "stuff".
imtringued 6y ago
It really isn't a joke. It tracks changes in cost of living pretty well. The real mystery is why the fed is committing to supply side economics in a demand starved economy. That's the exact opposite of what you should do.
- ForHackernews 6y ago
  Does the Fed have anything it can do on the demand side? I'm pretty rusty on my macroeconomics, but I thought you needed fiscal policy to buy stuff if you want to juice demand.

CPI is a joke of a metric. Very few economists take it seriously.

ForHackernews 6y ago

What metric would you prefer?

trhway 6y ago
my favorite is M3 https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S Edit: I thought it was obvious, yet in response to comment below - theoretically to get real inflation one has to adjust the M3 for the growth of the total amount of "stuff" in the economy. As that growth is just 1-2%/year , the M3 shape is visually indistinguishable from the real inflation on any given time period of up to several years.
- ForHackernews 6y ago
  That's not a measure of inflation, it's just a measure of money supply.
  - georgeplusplus 6y ago
    inflation is defined as expansion or contraction in the money supply
    - ForHackernews 6y ago
      https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp > Inflation is the decline of purchasing power of a given currency over time. https://www.economicshelp.org/macroeconomics/inflation/definition/ https://www.economicshelp.org/macroeconomics/inflation/defin... > A more exact definition of inflation is a sustained increase in the general price level in an economy. Inflation means an increase in the cost of living as the price of goods and services rise. https://www.economicsonline.co.uk/Definitions/Inflation.html https://www.economicsonline.co.uk/Definitions/Inflation.html > Inflation refers to a rise in the average level of prices sustained over time, which also corresponds to a fall in the internal (domestic) purchasing power of money.
- ForHackernews 6y ago
  In response to your edit, I don't know how you can claim that "real" (according to who? you?) inflation is somehow divorced from the purchasing power of a dollar. What matters to most humans is how far their wages go at the shop. Hand-waving at money supply and "total amount of stuff" without reference to prices makes as much sense as arguing "Well obviously daily commutes were shorter in 2019 than 1919 because cars are much faster than horses. Just look at my chart of relative top speeds!"
  - trhway 6y ago
    You forgot the second part - the total miles commuted. The same is inflation - faster growing total money divided by slower growing total "stuff".

imtringued 6y ago

It really isn't a joke. It tracks changes in cost of living pretty well. The real mystery is why the fed is committing to supply side economics in a demand starved economy. That's the exact opposite of what you should do.

ForHackernews 6y ago
Does the Fed have anything it can do on the demand side? I'm pretty rusty on my macroeconomics, but I thought you needed fiscal policy to buy stuff if you want to juice demand.