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While inflation may be decreasing, keep in mind that reported CPI numbers have consistently under-represented inflation since at least the early 1980's. This c

While inflation may be decreasing, keep in mind that reported CPI numbers have consistently under-represented inflation since at least the early 1980's. This chart demonstrates the inaccuracy concisely: [0]. According to FRED, the median worker should be living much more comfortably now than at previous times in recent history, when a median worker could, you know, buy a house with a yard, support a family, and retire. All because of some fundamental errors in how CPI is calculated that the government has no incentive to fix (combined with fundamental errors in how (un)employment is measured, but that's a different issue). [0] https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q

laidoffamazon 3y ago
Your evidence for stating that CPI is under-represented is showing that median real earnings are up at a historically high level (save for composition driven Q2 2020)? The facts aren't really relevant to your feelings here, they're showing the opposite - Americans are richer and make more money than almost any time in history.
- fhars 3y ago
  That graph illustrates the "should be living much more comfortably now" part of their argument, which is that the CPI adjustment used in that graph is deceptive. You are literally trying to twist their words into the opposite meaning to score a quick win.
  - laidoffamazon 3y ago
    > which is that the CPI adjustment used in that graph is deceptive There is no evidence for this other than vague gut feelings
- rcme 3y ago
  No, you're misinterpretating what the GP said. The linked Fed graph is showing that the median real earnings are at an all-time high. But how can that be true? Median workers in the past could easily afford health care, a house, and education. But they no longer can, so clearly the Fed's calculation of CPI does not accurately reflect reality. And I agree with this. When we talk about "inflation adjusted", we need a benchmark to compare the value of dollars across time. Typically CPI is used, but it has major issues. One major issue for the "median worker" is that real estate values are not included. Obviously many workers want to buy a house to live in so this is a glaring omission. Similarly, things like stock values are not included, even though the value of equities has a massive impact on a dollar's buying power. E.g. if consumer prices at time A and B are the same, but the value of GOOG is X at time A and 2X at time B, doesn't the dollar at time A has more buying power than at time B? Finally, CPI heavily weights things like consumer electronics and automobile. These are important, but people buy these things once in a blue moon and movement in these prices generally doesn't impact people that much.
  - laidoffamazon 3y ago
    Except they absolutely can afford health care, houses, and an education today too. The claim just nonsensical catastrophism not based on any data. The only reason why college attendance is slightly lower today is because the college wage premium is lower today. It's not cost, which has slightly decreased recently. Housing is the only thing getting more expensive because we don't build enough but yet the median American is still a homeowner.
    - rcme 3y ago
      The cost of college tutoring is up like 700+% from the 80s. Also ask yourself how many people can afford a house on a single family income like was possible in the 60s. It’s not many. Certainly not the median worker.
  - abeppu 3y ago
    > E.g. if consumer prices at time A and B are the same, but the value of GOOG is X at time A and 2X at time B, doesn't the dollar at time A has more buying power than at time B? To me, this seems like a misleading framing. When you say "consumer prices at time A and B are the same", you can point at a basket of concrete goods which we can agree are the same (a dozen eggs, a gallon of gas, etc). But if the value of GOOG is 2X at time B ... are shares the same? How would you know? Does GOOG at time B have more revenue or a different revenue growth trajectory, or is the competitive landscape different at time B, or did they buy a bunch of other firms? Absolute vs relative is not quite the right distinction, but a share is a portion of a whole whose value can change, and so not a clear unit for evaluating purchasing power. Perhaps slightly more concrete, shares of a REIT are going to change over time, but that can be because the stuff being held changed (they bought more property) or because the value of the stuff they already held changed.
    - rcme 3y ago
      Sure you would need to normalize the market value somehow, but that’s different than acting like such assets simply don’t exist. One way of thinking of share ownership is the price being paid for a share of future cash flows. That’s already kind of normalized across time.
- lend000 3y ago
  You seem to have missed the point -- I'm saying that only one of the two viewpoints can be true, because they are logically inconsistent, according to real wages. Where the two options are that CPI is accurate, and median standards of living have not improved, viewpoints that often seem to be held in tandem. Since there is other evidence against the accuracy of CPI, and also evidence that Americans are not enjoying a higher standard of living, I'm confident that the first one is not true (CPI does NOT accurately represent inflation).
  - laidoffamazon 3y ago
    No, I haven't missed the point. I'm saying their premise is wrong because people actually are richer than they have been in the past and that their doom narrative is a feeling and not based in reality.
    - lend000 3y ago
      I see. It would seem your feeling on that then rests on CPI being accurate, because if inflation has been underrepresented to the point that that median real wage chart would actually show a significant decline with "true inflation", then that's pretty damning against standard of living. And there is plenty of reason to think CPI is underrepresented besides that chart -- that chart is just an effective way to convince someone who already strongly believes living standards are declining. I don't have as strong of an opinion about living standards as I do about inaccurate inflation because I haven't been around long enough to run a household and buy groceries in the 80's, but from someone who talks about facts and feelings a lot, I was hoping for some more facts.
      - laidoffamazon 3y ago
        What evidence is there that Americans have a lower standard of living now than before in American history?
        lend000 3y ago
        That's your pet issue, not mine. I find the topic interesting enough that I would certainly read any sources or logical arguments you presented, but so far I'm just seeing "feelings". As for CPI, there are two fundamental issues that all result in lower-than-actual reported CPI. 1. If a household spends all of its money, and prices at the grocery store rise, it has to change which items it buys, likely switching to items which experienced lower inflation during that period. The BLS weights are determined by a survey of what median households bought, not what they bought last year before prices rose. That's a mistake that leads to lower reported inflation numbers. 2. Hedonic adjustments are free rein for arbitrary adjustments. For example, new vehicles did not go up in hedonic-adjusted price from 1997 to 2020 according to the BLS [0]. An automatic Toyota Corolla was $12373 brand new in 1997. It was $19700 in 2020. While operating expenses have decreased somewhat (due to better fuel economy), does that cover the 60% price spike to the median purchaser? No, fuel economy only improved 35%, and meanwhile gas prices have tripled so absolute operating expenses have increased. They throw in a bunch of other nonsense justifications like that new cars have bluetooth and other features that counter-act the price change. Our inflation numbers over those years did not incorporate a price increase AT ALL, so it's a fair assessment that real inflation was higher based on that alone. The Big Mac index has probably always been the most accurate assessment, free of political pressures. [0] https://fred.stlouisfed.org/series/CUUR0000SETA01 https://fred.stlouisfed.org/series/CUUR0000SETA01
pirate787 3y ago
On the demand side, we've added over 100 million people to the U.S. population since 1980.

laidoffamazon 3y ago

Your evidence for stating that CPI is under-represented is showing that median real earnings are up at a historically high level (save for composition driven Q2 2020)? The facts aren't really relevant to your feelings here, they're showing the opposite - Americans are richer and make more money than almost any time in history.

fhars 3y ago
That graph illustrates the "should be living much more comfortably now" part of their argument, which is that the CPI adjustment used in that graph is deceptive. You are literally trying to twist their words into the opposite meaning to score a quick win.
- laidoffamazon 3y ago
  > which is that the CPI adjustment used in that graph is deceptive There is no evidence for this other than vague gut feelings
rcme 3y ago
No, you're misinterpretating what the GP said. The linked Fed graph is showing that the median real earnings are at an all-time high. But how can that be true? Median workers in the past could easily afford health care, a house, and education. But they no longer can, so clearly the Fed's calculation of CPI does not accurately reflect reality. And I agree with this. When we talk about "inflation adjusted", we need a benchmark to compare the value of dollars across time. Typically CPI is used, but it has major issues. One major issue for the "median worker" is that real estate values are not included. Obviously many workers want to buy a house to live in so this is a glaring omission. Similarly, things like stock values are not included, even though the value of equities has a massive impact on a dollar's buying power. E.g. if consumer prices at time A and B are the same, but the value of GOOG is X at time A and 2X at time B, doesn't the dollar at time A has more buying power than at time B? Finally, CPI heavily weights things like consumer electronics and automobile. These are important, but people buy these things once in a blue moon and movement in these prices generally doesn't impact people that much.
- laidoffamazon 3y ago
  Except they absolutely can afford health care, houses, and an education today too. The claim just nonsensical catastrophism not based on any data. The only reason why college attendance is slightly lower today is because the college wage premium is lower today. It's not cost, which has slightly decreased recently. Housing is the only thing getting more expensive because we don't build enough but yet the median American is still a homeowner.
  - rcme 3y ago
    The cost of college tutoring is up like 700+% from the 80s. Also ask yourself how many people can afford a house on a single family income like was possible in the 60s. It’s not many. Certainly not the median worker.
- abeppu 3y ago
  > E.g. if consumer prices at time A and B are the same, but the value of GOOG is X at time A and 2X at time B, doesn't the dollar at time A has more buying power than at time B? To me, this seems like a misleading framing. When you say "consumer prices at time A and B are the same", you can point at a basket of concrete goods which we can agree are the same (a dozen eggs, a gallon of gas, etc). But if the value of GOOG is 2X at time B ... are shares the same? How would you know? Does GOOG at time B have more revenue or a different revenue growth trajectory, or is the competitive landscape different at time B, or did they buy a bunch of other firms? Absolute vs relative is not quite the right distinction, but a share is a portion of a whole whose value can change, and so not a clear unit for evaluating purchasing power. Perhaps slightly more concrete, shares of a REIT are going to change over time, but that can be because the stuff being held changed (they bought more property) or because the value of the stuff they already held changed.
  - rcme 3y ago
    Sure you would need to normalize the market value somehow, but that’s different than acting like such assets simply don’t exist. One way of thinking of share ownership is the price being paid for a share of future cash flows. That’s already kind of normalized across time.
lend000 3y ago
You seem to have missed the point -- I'm saying that only one of the two viewpoints can be true, because they are logically inconsistent, according to real wages. Where the two options are that CPI is accurate, and median standards of living have not improved, viewpoints that often seem to be held in tandem. Since there is other evidence against the accuracy of CPI, and also evidence that Americans are not enjoying a higher standard of living, I'm confident that the first one is not true (CPI does NOT accurately represent inflation).
- laidoffamazon 3y ago
  No, I haven't missed the point. I'm saying their premise is wrong because people actually are richer than they have been in the past and that their doom narrative is a feeling and not based in reality.
  - lend000 3y ago
    I see. It would seem your feeling on that then rests on CPI being accurate, because if inflation has been underrepresented to the point that that median real wage chart would actually show a significant decline with "true inflation", then that's pretty damning against standard of living. And there is plenty of reason to think CPI is underrepresented besides that chart -- that chart is just an effective way to convince someone who already strongly believes living standards are declining. I don't have as strong of an opinion about living standards as I do about inaccurate inflation because I haven't been around long enough to run a household and buy groceries in the 80's, but from someone who talks about facts and feelings a lot, I was hoping for some more facts.
    - laidoffamazon 3y ago
      What evidence is there that Americans have a lower standard of living now than before in American history?
      - lend000 3y ago
        That's your pet issue, not mine. I find the topic interesting enough that I would certainly read any sources or logical arguments you presented, but so far I'm just seeing "feelings". As for CPI, there are two fundamental issues that all result in lower-than-actual reported CPI. 1. If a household spends all of its money, and prices at the grocery store rise, it has to change which items it buys, likely switching to items which experienced lower inflation during that period. The BLS weights are determined by a survey of what median households bought, not what they bought last year before prices rose. That's a mistake that leads to lower reported inflation numbers. 2. Hedonic adjustments are free rein for arbitrary adjustments. For example, new vehicles did not go up in hedonic-adjusted price from 1997 to 2020 according to the BLS [0]. An automatic Toyota Corolla was $12373 brand new in 1997. It was $19700 in 2020. While operating expenses have decreased somewhat (due to better fuel economy), does that cover the 60% price spike to the median purchaser? No, fuel economy only improved 35%, and meanwhile gas prices have tripled so absolute operating expenses have increased. They throw in a bunch of other nonsense justifications like that new cars have bluetooth and other features that counter-act the price change. Our inflation numbers over those years did not incorporate a price increase AT ALL, so it's a fair assessment that real inflation was higher based on that alone. The Big Mac index has probably always been the most accurate assessment, free of political pressures. [0] https://fred.stlouisfed.org/series/CUUR0000SETA01 https://fred.stlouisfed.org/series/CUUR0000SETA01

pirate787 3y ago

On the demand side, we've added over 100 million people to the U.S. population since 1980.