4 ms·

"that's where we're arriving now" you know, years ago the deficit scolds said the US would turn into Greece "within two years". they were wrong. they said in

by spot 14y ago

"that's where we're arriving now" you know, years ago the deficit scolds said the US would turn into Greece "within two years". they were wrong. they said inflation would spike. they were wrong. and here you go doing the same thing again. the US will never default on its debt. period. it's the law. they will just use inflation to pay it if they have to. more likely the economy will return to growth and a combination of forces will keep it under control. yes this is a tax on savings. act accordingly. it's not the end of the world, we have all kinds of taxes. this one exists for a good reason.

niggler 14y ago
> inflation would spike Inflation did spike but what happened was that the definition was redefined in a deceptive way. Look at cereal prices and volumes. Prices have spiked and the containers/volumes have shrunk, but that's not taken into account under measures that exclude food prices. Energy prices have spiked. Gold prices have been running for more than 12 years. It's not to say we are seeing hyperinflation, but the CPI and other measures have changed in such a way that it makes inflation appear low.
- brown9-2 14y ago
  When people say that CPI doesn't show true inflation, what measure do they prefer to use instead?
  - kevinwmerritt 14y ago
    Here are some alternative CPI charts worth viewing: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
    - dmix 14y ago
      Shadowstats has been discredited so many times that not even libertarians (such as myself) would go near that as a reliable source.
      - aethertap 14y ago
        Could you post some links to this? I haven't seen it and would be interested to read more.
        dmix 14y ago
        It mostly comes down to the fact that shadowstats keeps their data behind a paywall and it has very little peer review. http://voxrationalis.wordpress.com/2011/05/15/the-absurdity-of-shadowstats-inflation-estimates/ http://voxrationalis.wordpress.com/2011/05/15/the-absurdity-... Also MIT collects a large amount of data using online prices to determine inflation rates http://bpp.mit.edu/usa/ http://bpp.mit.edu/usa/ So the inflation calculations might indeed be inaccurate but there isn't much solid data to back it up. I personally find it better to focus on issues that have lots of data such as the debt crisis [1], the growing costs of SS and medicare and the harmful effects of industry/government collusion [2] which are all very real and can be proven. [1] http://www.amazon.com/Endgame-Debt-Supercycle-Changes-Everything/dp/1118004574/ http://www.amazon.com/Endgame-Debt-Supercycle-Changes-Everyt... [2] http://i.imgur.com/XwyV4yi.jpg http://i.imgur.com/XwyV4yi.jpg
    - marvin 14y ago
      That's a very fascinating link. Are the claims made here true, that these charts are true to the 1980 definition of inflation? Are there any other factors that could make what is in these charts incorrect or misrepresented? I'm not from the US and don't have a first-hand impression of US price development. It seems unlikely to me that the US has really had >7% yearly inflation for well over a decade. So what gives? The most compelling counterargument is simply that the charts in your link don't reflect reality.
  - niggler 14y ago
    Usually it involves taking one common and fixed item, like cereal, and looking at its prices over time. While there are seasonal effects, looking at the price over a number of years gives you a good picture as to the actual inflation. The key thing here, though, is "fixed". Sometimes companies will make adjustments to the product to reduce costs, and those adjustments make the apparent inflation appear lower than they really are. For example, a jeweler can quote the same price for jewelry next year (assuming gold price rises) if they use less gold and more base metals in the jewelry. CPI measure would say that there was no change, although for all intents and purposes there was a change.
  - aethertap 14y ago
    I'm no economist, so take this with appropriate skepticism: I think the issue is that there probably isn't a "true" inflation. The main contention seems to be between those who use inflation as a measure of cost of living, and those who use it as a measure of policy-driven change in the value of money. Both views have their uses. Personally, I prefer the growth in money supply view because it seems to be less susceptible to manipulation by an agenda. The basket of goods is by necessity a small sample of the total cost of living, and I think that the main complaint lodged against it is that the goods are chosen and changed over time in order to portray a picture that's better than it would otherwise be. shadowstats.com has more information on how the CPI changes with selections in the basket of goods. Using the money supply as the definition of inflation gets closer to the viewpoint I care about, which is trying to get a sense of how policy is changing the value of my savings and income. I like to look at a simple ratio of money supply growth to GDP growth for some idea of how policy is changing the value of money, but this too is fraught with danger because it ignores important things like technical innovation, changing resource bases, and money velocity. So, I think it's a matter of personal preference and probably the best policy is to look at it from as many angles as possible if it's something that's important for your decision making.

by spot 14y ago

niggler 14y ago

> inflation would spike Inflation did spike but what happened was that the definition was redefined in a deceptive way. Look at cereal prices and volumes. Prices have spiked and the containers/volumes have shrunk, but that's not taken into account under measures that exclude food prices. Energy prices have spiked. Gold prices have been running for more than 12 years. It's not to say we are seeing hyperinflation, but the CPI and other measures have changed in such a way that it makes inflation appear low.

brown9-2 14y ago
When people say that CPI doesn't show true inflation, what measure do they prefer to use instead?
- kevinwmerritt 14y ago
  Here are some alternative CPI charts worth viewing: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts
  - dmix 14y ago
    Shadowstats has been discredited so many times that not even libertarians (such as myself) would go near that as a reliable source.
    - aethertap 14y ago
      Could you post some links to this? I haven't seen it and would be interested to read more.
      - dmix 14y ago
        It mostly comes down to the fact that shadowstats keeps their data behind a paywall and it has very little peer review. http://voxrationalis.wordpress.com/2011/05/15/the-absurdity-of-shadowstats-inflation-estimates/ http://voxrationalis.wordpress.com/2011/05/15/the-absurdity-... Also MIT collects a large amount of data using online prices to determine inflation rates http://bpp.mit.edu/usa/ http://bpp.mit.edu/usa/ So the inflation calculations might indeed be inaccurate but there isn't much solid data to back it up. I personally find it better to focus on issues that have lots of data such as the debt crisis [1], the growing costs of SS and medicare and the harmful effects of industry/government collusion [2] which are all very real and can be proven. [1] http://www.amazon.com/Endgame-Debt-Supercycle-Changes-Everything/dp/1118004574/ http://www.amazon.com/Endgame-Debt-Supercycle-Changes-Everyt... [2] http://i.imgur.com/XwyV4yi.jpg http://i.imgur.com/XwyV4yi.jpg
  - marvin 14y ago
    That's a very fascinating link. Are the claims made here true, that these charts are true to the 1980 definition of inflation? Are there any other factors that could make what is in these charts incorrect or misrepresented? I'm not from the US and don't have a first-hand impression of US price development. It seems unlikely to me that the US has really had >7% yearly inflation for well over a decade. So what gives? The most compelling counterargument is simply that the charts in your link don't reflect reality.
- niggler 14y ago
  Usually it involves taking one common and fixed item, like cereal, and looking at its prices over time. While there are seasonal effects, looking at the price over a number of years gives you a good picture as to the actual inflation. The key thing here, though, is "fixed". Sometimes companies will make adjustments to the product to reduce costs, and those adjustments make the apparent inflation appear lower than they really are. For example, a jeweler can quote the same price for jewelry next year (assuming gold price rises) if they use less gold and more base metals in the jewelry. CPI measure would say that there was no change, although for all intents and purposes there was a change.
- aethertap 14y ago
  I'm no economist, so take this with appropriate skepticism: I think the issue is that there probably isn't a "true" inflation. The main contention seems to be between those who use inflation as a measure of cost of living, and those who use it as a measure of policy-driven change in the value of money. Both views have their uses. Personally, I prefer the growth in money supply view because it seems to be less susceptible to manipulation by an agenda. The basket of goods is by necessity a small sample of the total cost of living, and I think that the main complaint lodged against it is that the goods are chosen and changed over time in order to portray a picture that's better than it would otherwise be. shadowstats.com has more information on how the CPI changes with selections in the basket of goods. Using the money supply as the definition of inflation gets closer to the viewpoint I care about, which is trying to get a sense of how policy is changing the value of my savings and income. I like to look at a simple ratio of money supply growth to GDP growth for some idea of how policy is changing the value of money, but this too is fraught with danger because it ignores important things like technical innovation, changing resource bases, and money velocity. So, I think it's a matter of personal preference and probably the best policy is to look at it from as many angles as possible if it's something that's important for your decision making.