4 ms·

The prices of most of the (inflation measure) inputs have been increasing, with different delays and magnitudes; it's not just one or two of the inputs. At what

by nickff 5y ago

The prices of most of the (inflation measure) inputs have been increasing, with different delays and magnitudes; it's not just one or two of the inputs. At what point do you acknowledge that there has been a general increase in the price level? If you agree that there has been an increase, when do you think it counts as 'inflation'? Inflation originally meant 'an increase in the money supply' (what we now call m1), which is what we've seen over the past two years. When the governments enacted their responses to COVID, many predicted 'inflation', and some denied it would happen. Does this count? What would 'count'?

RhodesianHunter 5y ago
The big numbers ARE driven by only one or two inputs though. Without used cars and housing, the supply of which took a huge hit for Covid related reasons, the print would be much lower.
- lumost 5y ago
  Perhaps we should also swap rent increases for living with additional roommates, clearly consumers are choosing more communal living situations and we can thus discount rent price increases as well. Just like we took home prices out of CPI /s If we get to choose which categories get excluded from CPI after every bad report it ceases to be a good metric.
  - sokoloff 5y ago
    CPI is a survey-based methodology and captures how people actually spend their money. If something becomes rare and expensive and people curtail their consumption of it, that is itself a useful signal. If something becomes common and inexpensive and people buy a lot more of it as a result, also a useful signal. Home purchase price was taken out of CPI-U in 1983 (and CPI-W in 1985) and replaced with an owner-equivalent rent measure that gets at the cost of consumption of shelter (the service that housing provides). Tl;dr: Housing expenses were not removed; house purchases were (and replaced with a rent-equivalent measure).
    - harambae 5y ago
      >owner-equivalent rent >a rent-equivalent measure The accusation is that OER is a terrible way to measure rent increases. OER is determined by surveys asking homeowners "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?" It's a crazy way to measuring housing inflation for most people. Especially since there are statistics that directly just measure rent increases and the BLS could use those.
- nickff 5y ago
  Well there are only a few main groups, and if we generally expect that some will respond faster than others, I'd say two or three going up would be quite indicative of general inflation. It seems like food, energy, and commodities (less food and energy) have gone up at different rates. The only major group that's been relatively stable (still about 4%) is services, and it seems likely that it's because many of them have been made illegal/unattractive for many recent months. https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf
Ericson2314 5y ago
It's perfectly normal for supply chain issues to radiate out and diffuse from the initial bottle neck. > At what point do you acknowledge that there has been a general increase in the price level? If you agree that there has been an increase, when do you think it counts as 'inflation'? Inflation is an rise an average of prices. It is a symptom, not a single disease. Monitarists might say there is "the" inflation where all the prices go up, and no good "real activity" excuse to point the finger that. That's like...just their theory, man. Until the panic is clearly done and production is clearly stabilized, occam's raiser says don't worry about such spooky stuff.
panick21_ 5y ago
I really don't care about inflation measures. Its simply not the right input tool. Its not about 'acknowledging' increases in the price level, The price level CPI measure is just a measure, if it goes up, I do 'acknowledge' that. However, what and if monetary policy should be, should not be guided by CPI inflation. > Inflation originally meant 'an increase in the money supply' (what we now call m1), which is what we've seen over the past two years. This is true for a very long time ago but has not been used like that for many decades. Bringing that point up is really a non issue, even in the 70s people were not using it like that. Basically no modern economics has ever viewed it like that. This is just a confusing point and argument about language. Yes, if you use that definition inflation has been high, but that does not actually change the policy response at all. > When the governments enacted their responses to COVID, many predicted 'inflation', and some denied it would happen. Does this count? What would 'count'? Again, you seem to be not at all understanding what I am arguing. I am not arguing that inflation doesn't exist. CPI Inflation simply doesn't mean what people think it means in terms of central bank policy. I have made no statement about what central bank policy should be, I have not actually studied the numbers in detail.

by nickff 5y ago

RhodesianHunter 5y ago

The big numbers ARE driven by only one or two inputs though. Without used cars and housing, the supply of which took a huge hit for Covid related reasons, the print would be much lower.

lumost 5y ago
Perhaps we should also swap rent increases for living with additional roommates, clearly consumers are choosing more communal living situations and we can thus discount rent price increases as well. Just like we took home prices out of CPI /s If we get to choose which categories get excluded from CPI after every bad report it ceases to be a good metric.
- sokoloff 5y ago
  CPI is a survey-based methodology and captures how people actually spend their money. If something becomes rare and expensive and people curtail their consumption of it, that is itself a useful signal. If something becomes common and inexpensive and people buy a lot more of it as a result, also a useful signal. Home purchase price was taken out of CPI-U in 1983 (and CPI-W in 1985) and replaced with an owner-equivalent rent measure that gets at the cost of consumption of shelter (the service that housing provides). Tl;dr: Housing expenses were not removed; house purchases were (and replaced with a rent-equivalent measure).
  - harambae 5y ago
    >owner-equivalent rent >a rent-equivalent measure The accusation is that OER is a terrible way to measure rent increases. OER is determined by surveys asking homeowners "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?" It's a crazy way to measuring housing inflation for most people. Especially since there are statistics that directly just measure rent increases and the BLS could use those.
nickff 5y ago
Well there are only a few main groups, and if we generally expect that some will respond faster than others, I'd say two or three going up would be quite indicative of general inflation. It seems like food, energy, and commodities (less food and energy) have gone up at different rates. The only major group that's been relatively stable (still about 4%) is services, and it seems likely that it's because many of them have been made illegal/unattractive for many recent months. https://www.bls.gov/news.release/pdf/cpi.pdf https://www.bls.gov/news.release/pdf/cpi.pdf

Ericson2314 5y ago

It's perfectly normal for supply chain issues to radiate out and diffuse from the initial bottle neck. > At what point do you acknowledge that there has been a general increase in the price level? If you agree that there has been an increase, when do you think it counts as 'inflation'? Inflation is an rise an average of prices. It is a symptom, not a single disease. Monitarists might say there is "the" inflation where all the prices go up, and no good "real activity" excuse to point the finger that. That's like...just their theory, man. Until the panic is clearly done and production is clearly stabilized, occam's raiser says don't worry about such spooky stuff.

panick21_ 5y ago

I really don't care about inflation measures. Its simply not the right input tool. Its not about 'acknowledging' increases in the price level, The price level CPI measure is just a measure, if it goes up, I do 'acknowledge' that. However, what and if monetary policy should be, should not be guided by CPI inflation. > Inflation originally meant 'an increase in the money supply' (what we now call m1), which is what we've seen over the past two years. This is true for a very long time ago but has not been used like that for many decades. Bringing that point up is really a non issue, even in the 70s people were not using it like that. Basically no modern economics has ever viewed it like that. This is just a confusing point and argument about language. Yes, if you use that definition inflation has been high, but that does not actually change the policy response at all. > When the governments enacted their responses to COVID, many predicted 'inflation', and some denied it would happen. Does this count? What would 'count'? Again, you seem to be not at all understanding what I am arguing. I am not arguing that inflation doesn't exist. CPI Inflation simply doesn't mean what people think it means in terms of central bank policy. I have made no statement about what central bank policy should be, I have not actually studied the numbers in detail.