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That’s because the inflation is mostly hidden in hedonic adjustments and improper basket allocation. You need only to look at the basket fraction that is housin

by rdtwo 6y ago

That’s because the inflation is mostly hidden in hedonic adjustments and improper basket allocation. You need only to look at the basket fraction that is housing and healthcare to see that inflation is being covered up as it’s too small a piece of the pie. Look at the price of a truck if you want to see hedonic adjustment in action covering up price increases.

MagnumOpus 6y ago
CPI does not cover either house prices (it covers rents, and imputed rends for home owners) or employer-paid/government-paid healthcare (it covers out-of-pocket expenses and add-on insurance only). If you are interested in house prices, look for the Case/Shiller phouse price index, if you are interested in health care costs, look for the PPI components of drugs, hospital services, medical devices etc. To counter your implied assertion - no, CPI is not being manipulated, but house price/CPI ratio has risen because mortgage rates are low, and medical care costs as a whole have risen mainly because of (a) proportionately more fat and old people, (b) agency problems in the health insurance model (overprescription/overtreatment out of defensiveness even if it is not cost effective).
- rdtwo 6y ago
  So CPI is not being manipulated just cost of living has risen and it’s not reflected in CPI. That’s silly. The CPI index basically picks and chooses which values to adjust and which to fix in order to get a desired outcome. It’s not a robust process there is a ton room to nudge numbers one way or another depending on if you want to show inflation or not. Think of it more like an accountant working towards whatever profit number the company wants to report this year. Generally the government can’t Show high inflation because doing so would have all sorts of second and third order consequences like increased SSI payout and higher government salaries as well as affect contracts and treasury bond yields. The entire market would crash if you got a 3-5% hot inflation number. That basically can’t be allowed

by rdtwo 6y ago

MagnumOpus 6y ago

CPI does not cover either house prices (it covers rents, and imputed rends for home owners) or employer-paid/government-paid healthcare (it covers out-of-pocket expenses and add-on insurance only). If you are interested in house prices, look for the Case/Shiller phouse price index, if you are interested in health care costs, look for the PPI components of drugs, hospital services, medical devices etc. To counter your implied assertion - no, CPI is not being manipulated, but house price/CPI ratio has risen because mortgage rates are low, and medical care costs as a whole have risen mainly because of (a) proportionately more fat and old people, (b) agency problems in the health insurance model (overprescription/overtreatment out of defensiveness even if it is not cost effective).

rdtwo 6y ago
So CPI is not being manipulated just cost of living has risen and it’s not reflected in CPI. That’s silly. The CPI index basically picks and chooses which values to adjust and which to fix in order to get a desired outcome. It’s not a robust process there is a ton room to nudge numbers one way or another depending on if you want to show inflation or not. Think of it more like an accountant working towards whatever profit number the company wants to report this year. Generally the government can’t Show high inflation because doing so would have all sorts of second and third order consequences like increased SSI payout and higher government salaries as well as affect contracts and treasury bond yields. The entire market would crash if you got a 3-5% hot inflation number. That basically can’t be allowed