4 ms·

Why is the price of gold more relevant than the Consumer Price Index?

dnautics 13y ago
both are terrible measures, as a long-term measure gold isn't so bad, but for point-to-point comparisons (as is done in the parent post), gold goes through some crazy speculative bubbles. The CPI is dastardly manipulated figures. (hedonic adjustments, substitutions)
- tanzam75 13y ago
  > The CPI is dastardly manipulated figures. (hedonic adjustments, substitutions) That's not manipulation. That's just trying to calculate an accurate number. If you do no substitutions, then you will end up being a Collectible Goods Index, rather than a Consumer Goods Index. It makes no sense to calculate inflation in 2013 based on a basket of goods from 1919. But that creates another problem. If you do no hedonic adjustments, then you will overstate inflation if consumers move upmarket. It's not the prices that went up -- it's consumer purchasing habits.
  - dnautics 13y ago
    I'm not suggesting there is a good way to measure inflation. But there is no objective way to make these adjustments. To suggest that the official adjustments are better for some reason is just a stealthy appeal to authority.
- mikeash 13y ago
  We all know that the Big Mac Index is the proper way to measure differences in money value. Assuming the Big Mac was still 45 cents in 1969 (as it was when it was introduced in 1967), and using The Economist's average US price of $4.56 for 2013, we get a roughly 10x increase, so it's worth about $1,000 today. That's substantially different from the CPI-based value. I wasn't quite expecting that.
  - tanzam75 13y ago
    McDonalds claims that the Big Mac cost 49 cents at introduction. [1] Also, imports have helped to keep inflation low. The Big Mac cannot be imported. Thus, you would expect it to show a higher rate of increase than overall prices. Source: [1] http://www.mcdepk.com/piratesofthecaribbean/mediadocs/big_mac_fact_sheet.pdf http://www.mcdepk.com/piratesofthecaribbean/mediadocs/big_ma...

both are terrible measures, as a long-term measure gold isn't so bad, but for point-to-point comparisons (as is done in the parent post), gold goes through some crazy speculative bubbles. The CPI is dastardly manipulated figures. (hedonic adjustments, substitutions)

tanzam75 13y ago
> The CPI is dastardly manipulated figures. (hedonic adjustments, substitutions) That's not manipulation. That's just trying to calculate an accurate number. If you do no substitutions, then you will end up being a Collectible Goods Index, rather than a Consumer Goods Index. It makes no sense to calculate inflation in 2013 based on a basket of goods from 1919. But that creates another problem. If you do no hedonic adjustments, then you will overstate inflation if consumers move upmarket. It's not the prices that went up -- it's consumer purchasing habits.
- dnautics 13y ago
  I'm not suggesting there is a good way to measure inflation. But there is no objective way to make these adjustments. To suggest that the official adjustments are better for some reason is just a stealthy appeal to authority.
mikeash 13y ago
We all know that the Big Mac Index is the proper way to measure differences in money value. Assuming the Big Mac was still 45 cents in 1969 (as it was when it was introduced in 1967), and using The Economist's average US price of $4.56 for 2013, we get a roughly 10x increase, so it's worth about $1,000 today. That's substantially different from the CPI-based value. I wasn't quite expecting that.
- tanzam75 13y ago
  McDonalds claims that the Big Mac cost 49 cents at introduction. [1] Also, imports have helped to keep inflation low. The Big Mac cannot be imported. Thus, you would expect it to show a higher rate of increase than overall prices. Source: [1] http://www.mcdepk.com/piratesofthecaribbean/mediadocs/big_mac_fact_sheet.pdf http://www.mcdepk.com/piratesofthecaribbean/mediadocs/big_ma...