I have been tracking my household expenses religiously for years. Down to how much we spend on milk each year, or how many boxes of breakfast cereal we go through. And without changing habits (I worked from home previously) or spending any differently for most of 2020 I saw a slight upward tick that was more than I would expect for previous years, about a 10% increase across the board in terms of energy, health care costs, food costs. In 2021 that upward tick turned in to way more than just a tick.
Food habits haven't changed, nor have quantities. I shop at a mixture of Food4Less, Ralphas, Gelsons and a few small items at Whole Foods, but food expenditure has increased by 30% to 40% since start of 2020. Household energy usage has remained the same, but somehow the price is 20%+ higher than at the start of 2020. Monthly health insurance costs have increased by 17.1%
A gallon of milk or a carton of eggs is about where it has been for the past three or four years, because a gallon of milk or a carton of eggs doesn't go up by 3 cents each month, it jumps by a dollar once every three years. Low-end commodities like that tend to stay artificially deflated for a while. I am expecting milk, eggs, and other basics to jump by a dollar or two in the very near future.
I am just a single data point, but something seems "off" with all officially reported statistics. Something isn't being captured somewhere.
Huh, I'm seeing the opposite here. My health insurance premium (Kaiser) went down 5% this year, and dental insurance gave a 1-month "premium holiday" (~8% discount). Granted, that seems also related to "skimpflation", because people made fewer non-emergency visits due to the pandemic and just reduced consumption of medical services, versus individual medical services getting cheaper. But it does still save me money on my own insurance coverage, independently of my own consumption, which adds a bit of a twist.
On other big-ticket items: My rent is exactly same as it was in 2019 (I pay the same rent for the same apartment). My commute (on transit) got a whopping 25% cheaper as they slashed the price of monthly passes. For leisure, the prices of Amtrak tickets, hotels, and AirBnBs are all down a lot, at least in the Northeast, maybe in the range of 30-50%. Fresh groceries are definitely a bit up, that much I agree with. My staple Amazon Subscription orders, though, are flat to slightly down, e.g. La Colombe canned coffee is about 15% down from its 2019 prices (used to be $12/4-pack and is now $10/4-pack).
Overall my cost of living is deflating a moderate amount. I suspect some of the disconnect is that supply/demand has shifted, e.g. cars have gotten more expensive while trains/buses have gotten cheaper. So those effects partly cancel out. I'm not going to argue they fully cancel out, but for me personally I have seen slight deflation.
My Kaiser health insurance is increasing from $1392 to $1563 in December. It is actually a bigger increase this year than last year. My wife and I haven't talked to a Doctor or stepped foot in a hospital in four years.
I have noted increases in many staples on Amazon Subscriptions which include pet food, shampoo, shaving foam, pet treats and so forth. Routine pet medication at the vet has increased around 10% over the course of the year.
Oddly enough our 5lb bags of coffee have stayed the same price for almost 4 years.
Do you also happen to have data from before the pandemic? What was the trend then?
I'm surprised by seeing everyone in the whole thread and the article talking about the last two years. The way I see it, both shrinkflation and "skimpflation" were already blindingly obvious way before pandemic, and looking at the stats from the last two years makes reasoning difficult because of, well, a global pandemic.
I have data for household budget going as far back as 1999. Though not everything can be inferred from that data simply because of lifestyle changes, e.g. getting married, moving to different cities, education, and changing dietary habits (cutting sugar, cutting salt, eating out less, consciously choosing less processed foods).
But 2013 to 2019 was a stable period with few lifestyle changes and the trend was around 6% per year for my "basket of household items" with the occasional bumps of "milk just went up by a dollar at the local Food4Less lower tier grocery store." The largest inflationary food items I've seen have been meat and poultry.
The largest non-food inflationary items I've seen are gasoline and health insurance. Car insurance I cannot track due to a minor "at fault" accident adjusting insurance rates in 2018. Storage locker increases by around 4% per year. Household insurance increases by around 5% per year.
My life is only a single, but extensively tracked, data point. But "something seems screwy in the state of Denmark" to paraphrase Shakespeare.
>A gallon of milk or a carton of eggs is about where it has been for the past three or four years, because a gallon of milk or a carton of eggs doesn't go up by 3 cents each month, it jumps by a dollar once every three years.
because it's averaged out across multiple stores across the country?
My guess would be because it is a price that is easy to know, and one that would push shoppers away. I know that a gallon of milk is 4.99 at most grocery stores(where I live in Canada). I don't know off the top of my head the exact price for any of the other things I regularly buy. If I saw a gallon of milk for 5.99 I would assume that I was shopping for groceries at a place that has generally higher prices for all foods. I doubt this is a rational signal, but it is the way that my brain works.
CPI is a measure that's calculated by using the price of a standardized basket of things. It's indicative of inflation overall, but every person's personal inflation rate is different because it's affected by the exact mix of goods and services they buy, which aren't going to be the same as the basket.
If your family are experiencing inflation higher than 20%, it's because you're consuming more of things which inflate faster than the basket.
Basket of things with a vastly oversized share of cheap plastic crap made in East Asian sweatshops and or unrealistic substitutes. If 95% of Americans see a "personal inflation rate" significantly larger what the government claims, perhaps the government methodology is not particularly informative?
This is the point where the burden on proof lays with those that claim the government methodology is relevant: What is the "basket of things" composition and how many Americans have a spending profile anywhere near that?
The Economist publishes a fun and simple metric called the Big Mac Index.
They present it as a way of looking at forex rates. If 1 USD buys you 1 swiss franc, but a Big Mac costs $5 here and 7 CHF there, then maybe the franc is overvalued. In any case you lose McDonald's purchasing power by converting.
But you could just as easily use it for inflation.
Big Macs are a stable product. A Big Mac sold in 1985 is very similar to one sold yesterday. Also, it includes a good mix of basic inputs. Land rents, transport costs, labor, and food ingredients.
Although if we assume any technological progress in the last 35 years a big mac should probably have gotten a little bit cheaper. So the impact of inflation-causing-forces (aka, the reserve banks) is probably higher than 4%.
I worked part time at a McDonald's from ~1991-1995. At the beginning of that period, we immediately assembled Big Macs with freshly grilled patties, then let them sit in a warmer for <=10 minutes before throwing them out.
By the end of my tenure at McDonald's, we were cooking patties and storing them in steam warmers for up to 30 minutes before tossing them. The same patties were used for regular burgers and Big Macs. We'd create Big Macs as needed by demand, assembling them later.
I don't know the #s, but was told that this change was to reduce product waste.
Grilling equipment and process also changed over this time period, slightly reducing the number of staff needed to run the grill and reduce the likelihood of overcooked (and thus wasted) meat.
I imagine numerous other efficiencies/changes have been made over the decades that would influence the cost to make Big Macs.
It isn't my area, but something called "Total Factor Productivity" is up around +50% since 1985 [0].
There are a lot of ways to make things cheaper. The world has seen startling progress in logistics, organisation, science and tech in the last 30 years. Some of that is applicable to gathering food more cheaply.
I suppose maybe all the gains could have been eaten up (heh heh) by population growth. The underlying equilibrium here isn't static, at any rate. The real price of a hamburger will not be steady.
Part of the logistics improvements over the decades is "just-in-time" delivery at multiple stages, from raw materials to store delivery. The pandemic knocked that out of whack resulting in supply chain issues. The cost of mitigating that in the short term and longer term undoing some of the over-optimization for efficiency at the expense of robustness will be passed on to the consumer.
>Technological progress in hamburger making? It’s meat between bread.
That big mac is at the end of a literally global supply chain. The cost of the tires on the car of the fry cook and the number of temperature sensors one can afford to put in the reefer ship that gets the tomatoes from Argintina all have an impact on the overhead of a big mac. And this is in addition to all the direct process improvements others have mentioned. Heck, the internet has opened up a whole new world of operational efficiency for the farmer that grows the grain that feeds the cattle. He can buy parts for his machines or compare spec sheets for fertilizers from his iphone while sitting in the cab of his tractor that almost drives itself. In 2001 he had to thumb through a catalog or call someone.
The right-to-repair movement is coming from farmers who are unable to do better than call someone, in 2021, because their large farm equipment (tractors, etc) are locked down more thoroughly than an iPhone, with large support contract requirements on top of that. Not that it changes your point, but the inability to fix things will certainly change how the US market behaves.
McDonald's was one of the prototypes of the fast food industry. There was absolutely technological progress in food preparation to be made when they did that. It seems silly to assume they wouldn't keep that up.
Of course there is plenty of progress to make. You have to look at the whole value chain, not just the last step that happens at the restaurant. Bread and meat have to be made, preprocessed and shipped. Plenty of things along the way that are subject to optimization.
There are ways. Automate the burger making machine. Reduce inventory, "just in time" supply chain. Pay the workforce less, aka "financial innovation". Substitute lower quality ingredients. Shrink the burger size. Harvard, here I come for my MBA.
The Big Mac index is pretty stupid though, since the ingredients in various countries are different and not sourced from the same place. Here en Europe McD tries to be somewhat middle class while I'm the us it's absolute trash.
Was going to say that. They have a green logo and regularly claim some of their products are hyper local now here in CH. I doubt they have to do this in many other countries.
Other than that price differences in food between $ and CHF are likely mostly explained because work hours simply cost a lot more around here.
> I doubt they have to do this in many other countries.
Not sure why you would think that. McDonalds is famous for catering it's menu and service to it's locale.
In Australia they were required to serve real chicken in their nuggets, and they're always advertising that they use locally sourced beef for their burgers.
They also rebranded in a sense to upmarket themselves, and started selling salads, cakes and coffees in order to sneak a foot into the Australian cafe scene.
It was never intended to be taken seriously. The reason that it is taken somewhat seriously is because it turns out to be a much more reliable indicator than you might naively expect. That said, no one truly relies on it for anything more than a rough indication.
I believe the ingredients were always different due to Australia's "Allowed Substances" list and local ingredients availability. Similar to the controversy over "Pink Slime" for their beef patties never being an issue here, because the substance was already banned.
I honestly had no idea, I just noticed the logo being not green in the surrounding countries. I haven't put a foot in any of their stores for over 15 years now
They also regularly reiterate that the index is meant partially in jest, and that you shouldn't expect it to generalize in any kind of highly accurate way. Also, the leap from forex to inflation is a big one; AFAIK they haven't argued the data is valid to use as you are here, which is different from judging exchange rates (it must surely be normal for various kinds of goods and services to inflate differently, right?). They simply point out that it works surprisingly well for something so simple.
Even assuming the 2% numbers are more representative of the average household, the 4% big mac number sounds entirely consistent with that.
TL;DR: this is interesting, but I don't see how this data clarifies anything.
Big Mac depends on the popularity of MacDonalds which is incomparably higher the US than most of the EU (or Switzerland). MacDonalds is just not popular and as sibling Galaxeblaffer mentioned it's not directly targeted as a lower class restaurant. In most places/countries I have seen Big Mac are not even advertised. Some of the local regulations would prevent the same Big Mac prepared, either.
Great - now The Economist needs to add a skimpflation factor, probably by doing something like buying a real Big Mac and then weighing the patty, and the wait time. (Although really everything about the experience can be skimped on, like taking away ketchup.)
This is a valid criticism of the methodology and if you look at a sibling of your comment, someone has posted a great resource that discusses some of this in depth. There are a lot of critics of CPI who feel it is manipulated by the BLS either intentionally or unintentionally. The methodology was also changed from being a "Cost of Goods Index" (literally the basket I described above) to a "Cost of Living Index" (which is intended to reflect the cost of maintaining a constant standard of living over time allowing substitutions in the basket but still suffering from the problem I describe above where your personal standard of living derives from the goods and services that you consume and therefore will differ from the index composition), and there are entrenched proponents of both the COGI and COLI methodologies.
I'm not an economist, but one fundamental problem with any consumer index (as far as I can see) is that as you become richer in absolute terms the marginal utility of any additional dollar goes down (eg your life doesn't change that much if you upgrade your already expensive phone but it changes a heck of a lot if you can't afford to buy enough food) and therefore poorer people experience far more harm from inflation than richer people. Not sure any index ever captures that effect adequately.
It sure seems like the big three these days are housing, food, and gas.
Housing is complicated, because it's less elastic. Moving sucks, is expensive and kind of emotional. It's sorta sticky because it's such an ordeal, so (I think) there's some scalping, charging a bit more because making a switch is just a pain in the ass.
Food is weird. if you can put together a hotplate and a sink, food can be relativly inexpensive, and tasty, but time consuming. If you can't it's pretty ugly. Personally, I'd probably just go with multivitamins and beer. Dual duty as calories and entertainment. That's a disaster long term though.
Gasoline sucks because it's a magnifying effect. Take a bag of rice. the rice gets trucked somewhere to get packaged. the bag gets trucked from a factory, the plastic gets trucked to the factory. Every step has a transportation cost, and it compounds.
I'm not rich. I could take a long break from work if I needed to, but I gotta work. I'm very lucky to be where I am. CPI makes a lot of sense for me.
I think it's not so great because a cop and a teacher couple with no kids, totally reasonable professions, damn near a Rockwell painting, struggle.
I don't think it'll ever be easy for everyone. but damn. does it have to be so damn hard at the bottom? I think the CPI doesn't really work out for the bottom N% and I'm not really sure of the value of N. I hope N is still kinda small, because if N gets big, things get really ugly for everyone.
I dunno. CPI is a metric. it has a meaning. mean median and mode have meaning, but they don't tell the whole story. I think CPI highlights some things, but don't think for a second it's the whole story.
That harm does not capture the reduction in debt caused by inflation though. Inflation benefits debtors over creditors, even if it also effectively lowers wages.
That's true although if you're spending all of your income on debt service and basic living costs, then reducing the real value of the nominal of your debt doesn't in fact increase your standard of living at all. Theoretically you're better off, but all of your income still goes on debt service and basic living costs. The basic living costs have gone up in nominal terms while the debt service is still the same. It's depreciated in real value but the nominal is still the same.
But as you correctly put it, it's a cash wealth tax. The poor have all the wealth they do have in cash. Similar for those somewhat above poverty, if they done go deep on debt.
The poor don't hold debt. "I live in a nice house that's still owned by the bank" is not poverty.
And you might find that even many of the rich (who have far more in assets than they have in debt or cash) will still have more debt than cash, because while investing on debt is generally considered stupid, investing on debt that could be fully cleared by the the object invested in (house/land) as collateral is the exception. People rich enough to buy houses for renting out rarely pay them in cash. The winners of inflation debt decay are not who you think they are.
> I would think that the poor have no cash… that's why they're called "poor" after all.
They have contracts denominated in cash—for example, their wages from employment. That's where inflation tends to hurt the most since wages tend to trail behind inflation (or deflation). And of course being "poor" doesn't imply that you literally have zero savings, though you probably don't have enough to be worth the hassle and expense of a brokerage account to invest in stocks, ETFs, or mutual funds. For small amounts the transaction fees alone would be more than the gains.
Regarding the article you cited, it occurs to me that the authors never mentioned how long any given household remains in a particular category. If I took a year-long sabbatical from work, for example, then I would end up in that "lowest 20%" group with zero income while I lived off my savings, but that doesn't mean I'm experiencing any kind of financial difficulty. The same goes for students still receiving support from their parents, or for anyone who is retired and living off of a lifetime's worth of investments (though probably not pre-tax 401(k)/IRA, depending on the study methodology, since these distributions are generally considered "income" for tax purposes). "Lowest 20% by income" is not a fixed group. This is apparent simply from the fact that expenses cannot exceed income indefinitely; eventually you must either increase your income, at which point you are no longer counted in that statistic, or else decrease your expenses. But the idea of a shifting group of households which temporarily earn less than they spend paints a very different picture than the one the article implies.
It's not a stealth cash wealth tax. It's literal debt forgiveness. You can even call it a collectivized form of continuous insolvency. E.g. instead of every 20th debt contract being forgiven entirely 5% of every debt contract is forgiven.
The benefit is that if the creditors (mostly upper classes) refuse to forgive the debt then you don't need an angry mob with pitchforks to cancel the contract (revolution).
They still hold a decent amount of cash as a percentage of their portfolio. 10% of a million dollar portfolio is still $100k which is more than the average joe has. He would use that money to buy a house instead of letting it sit around.
Yes, bigger down payments suck but that is mostly a zoning/housing supply issue.
I’d guess that many (perhaps most) wealthy households hold far more dollar-denominated debt in their real-estate and business interests than they do cash.
It's very rare for wealthy people to hold 10% of their assets in cash (or even cash equivalents). When they purchase real estate they usually take out loans secured by their other assets.
Creditors take inflation into account when making loans.
Only higher than expected inflation helps debtors.
Lower than expected inflation hurts debtors.
I'm not sure why you think Creditors would consistently underestimate inflation. Maybe they do, but why would they?
One thing I am sure of, is that when inflation expectations change a lot so that there is a lot of doubt as to what future inflation will be, then creditors charge a higher premium for that perceived increase in inflation risk. That hurts debtors.
> Creditors take inflation into account when making loans
No, they do not, because they typically only hold the note for a few days before it gets securitized and sold onto a market that is pinned by a very large, inflation-agnostic player: The Fed.
Now, we'll see what happens to this market if and when they begin to taper, but I think all the non-Fed players in this market remember what happened the last time they tried it, and they're all betting, correctly, that Powell will be forced into not only NOT tapering, but increasing purchases.
All of these markets: treasuries, mortgages, auto loans, and junk bonds, know for a fact that there will always be an artificially high bid for their toilet paper. Why would they care?
What you say makes logical sense, but is hard to square against the fact that, as a nobody, I can borrow $1M at under 3% fixed interest for 30 years to buy a house.
The creditor who will ultimately hold that paper has a very different outlook on inflation rates than I do, but I’m happy to take the loan, especially since a side-effect is having a place to live.
> What you say makes logical sense, but is hard to square against the fact that, as a nobody, I can borrow $1M at under 3% fixed interest for 30 years to buy a house [...] The creditor who will ultimately hold that paper has a very different outlook on inflation rates than I do,
Such questions deserve answers.
There is a lot that I skipped over, not wanting to get into the weeds of economic theory and start more arguments about whether the Fed controls rates or whether markets do (orthodox theory says markets control real rates and the fed only controls nominal rates, and thus inflation), and how savings demands respond to interest rates, and whether mortgages are risk free rates or not.
All of that complicates the simple picture I painted, but I think that picture is basically correct.
Suffice it to say that in terms of risk-free rates, the creditor's alternative is to buy a TIPS -- inflation protected bond -- which currently yields -1%
So we are living in a very low interest rate world right now.
Given that most likely your mortgage is government guaranteed (what mortgage isn't?) the entirety of the 3% you are paying is just as an inflation hedge plus some risk of pre-payment -- again, I have no idea what kind of points you have and the specific terms of the loan.
If inflation was believed to be zero, you could probably get the same mortgage for less than 1%, maybe even 0%.
We live in a world with very low real rates, but that does not mean that creditors don't take inflation risk into account.
> Suffice it to say that in terms of risk-free rates, the creditor's alternative is to buy a TIPS -- inflation protected bond -- which currently yields -1%
TIPS have a yield that is referenced to the CPI (attempting to present a real yield), not a yield expressed in nominal dollars, so direct comparisons against mortgage rates (inherently nominal yield) are not very productive.
The close equivalent to the 30YR mortgage rate is either the 10-year Treasury (currently yielding ~+1.6%) or, if you insist on matching maturities, the 30-year (currently yielding ~+2.0%)
So, whatever risk premium the lender is demanding on a 0-points, 30-year fixed mortgage, it's a maximum of 1.4% (3.0%-1.6%). As a borrower, I'll happily take that deal.
> What you say makes logical sense, but is hard to square against the fact that, as a nobody, I can borrow $1M at under 3% fixed interest for 30 years to buy a house.
that's canceled out by prices being higher because every other buyer has access to the same rates. Your monthly payments works out to be the same in the end because everybody bids up to the max they can afford.
That 3% fixed interest rate isn't a real market rate. Most of those mortgages are purchased by Fannie Mae and Freddie Mac. Those companies are too big to fail and sponsored by the Federal government. If they went away then 30 fixed mortgages would barely even be available, or at least the interest rates would be far higher.
> I'm not sure why you think Creditors would consistently underestimate inflation. Maybe they do, but why would they?
Hard to predict, in general. Would you have predicted we’d be looking at 5% inflation right now, three years ago? We haven’t seen inflation like this in decades.
> That hurts debtors.
Only if they have variable-rate loans.
The broader point here is that it’s creditors (and the wealthy) who bemoan inflation the most because it means their rents are going to be worth less.
> Creditors take inflation into account when making loans.
How? I'm pretty sure that is determined by the market. 10 year treasuries are yielding 1.587% which is less than inflation and people still buy them because your alternative is cash with even worse returns.
Upper middle class and rich people benefit from debt. Lower middle class and poor people suffer from it.
- lower middle class/poor: A cleaner working hand-to-mouth taking a payday loan isn't inflation hedging. She's paying through the nose for the privilege of a 33% loan because she's a risky debtor.
- middle class: I make money on my mortgage. I see my 1.22% 20 years fixed mortgage melt away against a salary that is raising with inflation. Plus I get rewarded by government with a tax deduction. Similar story for our rental.
- rich: Elon Musk can live off margin loans against a fraction of his investment portfolio if and when it makes sense.
> middle class: I make money on my mortgage. I see my 1.22% 20 years fixed mortgage melt away against a salary that is raising with inflation. Plus I get rewarded by government with a tax deduction. Similar story for our rental.
The mortgage interest tax deduction only applies if you itemize, which literally 90% of people do not do as of 2019 IRS statistics. Effectively, there is no mortgage interest tax deduction for middle class since the 2017 tax cut ACA jobs act.
I don't live in the US. Plenty of places have some form of mortgage fiscal stimulus. Even without the fiscal advantage, I would still be making money on this.
The mortgage is in Belgium. Friends have even lower fixed rates. Some others have negative interest rates on their adjustable ones. Their bank literally pays them.
> What is the "basket of things" composition and how many Americans have a spending profile anywhere near that?
Well:
> 2. How is the CPI market basket determined?
> The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought. There is a time lag between the expenditure survey and its use in the CPI. For example, CPI data in 2020 and 2021 was based on data collected from the Consumer Expenditure Surveys for 2017 and 2018. In each of those years, about 24,000 consumers from around the country provided information each quarter on their spending habits in the interview survey. To collect information on frequently purchased items, such as food and personal care products, another 12,000 consumers in each of these years kept diaries listing everything they bought during a 2-week period.
> Over the 2 year period, then, expenditure information came from approximately 24,000 weekly diaries and 48,000 quarterly interviews used to determine the importance, or weight, of the item categories in the CPI index structure.
> What is the "basket of things" composition and how many Americans have a spending profile anywhere near that?
The BLS isn’t hiding this information, it’s publicly available. The burden of proof would be on you to provide research on why that methodology is incorrect.
> The CPIs are based on prices of food, clothing, shelter, fuels, transportation,
doctors’ and dentists’ services, drugs, and other goods and services that people
buy for day-to-day living. Prices are collected each month in 75 urban areas
across the country from about 6,000 housing units and approximately 22,000 retail
establishments (department stores, supermarkets, hospitals, filling stations, and
other types of stores and service establishments). All taxes directly associated
with the purchase and use of items are included in the index. Prices of fuels and
a few other items are obtained every month in all 75 locations. Prices of most
other commodities and services are collected every month in the three largest
geographic areas and every other month in other areas. Prices of most goods and
services are obtained by personal visits or telephone calls by the Bureau’s
trained representatives.
A lot of people take issue with hedonic adjustments, substitution threshold, etc - but the specific methdology used is far less important than the fact that they're simply lying about the data.
For one example, the obvious elephant in the room is the shelter category. In the last year, rents are up 12%[1], and home prices have soared nearly 20%[2]
Yet, from your own source, the BLS is claiming 3.2% for the shelter category.
It's not so much that the methodology is wrong (although that argument could be made as well), but that they're flat out lying.
And then you have to contend with the Gell-Mann amnesia effect: if they're lying to your face about the shelter category, what makes you think the data in any of the other categories, for which you have less third party data to corroborate, are not also completely fabricated?
1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases, they aren't going to agree with tracking overall rent.
2) When you buy a house, you get two things: shelter and an investment asset. The inflation statistics are only interested in shelter, not investments, so they disaggregate them. They do this by computing the rent for an equivalent dwelling. For this reason, the home price index won't agree with the inflation statistics either.
> 1) The rent data you cite is for new leases. Since new leases only represent a fraction of total leases
The vast, vast plurality of residential leases are for 12 months - and the vast majority are for 6, 12, or 18 months. So no, you're flat out wrong, here. We're talking YoY numbers, so these values reset literally at the end of the timeframe we're discussing.
> 2) When you buy a house, you get two things: shelter and an investment asset.
Cool. Home ownership is at a multi-generational LOW in the United States, with a huge proportion of the HN demographic comprising those currently priced completely out of this market. The OER metric weighting is not updated frequently enough to sufficiently account for this fact.
The reality is that between shelter, fuel, and food, our cost of living is skyrocketing on the order of 12% per year, and the CPI understates this for obvious political reasons. The real yield on a 10y treasury is about -10%, so it's no wonder that obvious scams like AMC, JPEG NFTs, and Shiba Inu (the coin, not the breed) are so popular. You reach for yield any place you can.
==For one example, the obvious elephant in the room is the shelter category. In the last year, rents are up 12%[1], and home prices have soared nearly 20%[2]==
The median person does not see a 20% increase in housing prices if they are not currently purchasing a home.
I have a 30-year mortgage and my housing costs have not increased since I purchased it. Add in the 65% home ownership rate and it isn't out of question that a large portion of the country isn't seeing as much housing inflation in their actual budgets.
Home prices are not included in the shelter category. Homeowners are considered to be paying an implicit rent as their cost of shelter, which is based on the market rate of a comparable rental.
Your source for rentals looks at the cost of new leases. The BLS methodology looks at the most recent rent of a sample of units, regardless of when the rent was set.
We would expect your source to report a higher increase, because its methodology is more responsive to short term changes. That does not show that the BLS is lying.
I wonder if they're able to discount this because the low interest rates mean that monthly payments have not increased 20% for most mortgage borrowers.
I'm not taking the bait. As far as I'm concerned, CPI methodology is a truism worthless by itself. Like saying "goods and services cost money". If you want to argue the specific numbers issued by the government are representative of the evolving purchasing power of the dollar, you have to do the work to prove it.
One of the more difficult problems faced in compiling a price index is the accurate measurement and treatment of quality change due to changing product specifications and consumption patterns. The concept of the CPI requires a measurement through time of the cost of purchasing an unchanging, constant-quality set of goods and services. In reality, products disappear, products are replaced with new versions, and new products emerge.
When a data collector finds that he or she can no longer obtain a price for an item in the CPI sample (often because the outlet permanently stops selling it), the data collector uses the CPI item replacement procedure to find a new item. Each priced item stratum in the CPI contains one or more ELIs. CPI commodity analysts have developed checklists that define further subdivisions of each ELI. When seeking a replacement in a retail outlet, the data collector first uses the checklist for the ELI to find the item sold by the outlet that is the closest to the previously priced item. Then the data collector describes the replacement item on the checklist, capturing its important specifications. The CA assigned to the ELI reviews all replacements and selects one of three methods to adjust for quality change and to account for the change in item specifications.
The following example describes the most common type of quality adjustment problem. Assume that a data collector in period t tries to collect the price for item j in its assigned outlet and is not able to do so because the outlet no longer sells this item. (A price for item j was collected in period t–1.) The data collector then finds a replacement item and collects a price for it. This replacement item becomes the new version v+1 of item j. The commodity analyst decides how the CPI treats the replacement. The commodity analyst has the descriptions of the two versions of item j. In addition, he or she has the t–1 price, , for the earlier version v and the period t price, , of the replacement version v+1. The following matrix displays the information available to the commodity analyst:
>Basket of things with a vastly oversized share of cheap plastic crap made
The "basket of things" is made from the ratios of things consumers buy. BLS explains the methodology and lists the basket, and how it evolves as people buy less horse carriages and more cars, less giant radios and more iPhones, and so on.
Making a basket that better represents inflation would be worth a lot of money, and a lot of groups try, but none really do any better than the BLS.
For example, the Billion Prices Project out of MIT tracks a vastly larger number of things, but ends up with the same inflation rates http://www.thebillionpricesproject.com/
Ever consider you are special? If you’re posting on this site, chances are you are more educated, richer, and better employed than most of your compatriots in whatever country you’re in. Of course luxury goods inflate faster. We can afford it.
An interesting point raised in the NPR piece is that sometimes your basket stays the same at the same price, but the content is actually inferior in subtle and not so subtle ways.
My personal observation on the snacks I buy: they are the same volume and taste mostly the same, but the ingredients shifted over time, in particular relating to flavor (e.g. less sugar and more "sugary stuff")
BTW In parallel they introduced "rich" versions that are more "luxury", clearly distinct from the standard product, and contain better ingredients overall. I'd expect a number of people to have switched to the pricer version, even if they were really seeking the "old" standard version.
Black beans are another example. There are various brands available here. The expensive ones had more/all beans that were black in colour while the cheaper, particularly store brands, were all dark brown. Presumably there are different grades of beans so the price of the can was a predictor of the colour of the contents. Now when you open a can, regardless of brand, they are almost universally dark brown.
> An interesting point raised in the NPR piece is that sometimes your basket stays the same at the same price, but the content is actually inferior in subtle and not so subtle ways.
And sometimes the content is actually superior. A US$ 30K nowadays is generally much better than a similarly priced car from 10 or 20 years ago. The iPhone was released in the United States in 2007 at the price of $499 for the 4 GB model and $599 for the 8 GB model: what kind of tech can you get for the same prices nowadays?
Everyone seems to ignore deflation, especially due to technology.
This 1991 Radio Shack add illustrates the point quite well IMHO:
> There are 15 electronic gimzo type items on this page, being sold from America’s Technology Store. 13 of the 15 you now always have in your pocket.
> So here’s the list of what I’ve replaced with my iPhone.
> * All weather personal stereo, [*US*]$11.88. I now use my iPhone with an Otter Box.
> * AM/FM clock radio, $13.88. iPhone.
> * In-Ear Stereo Phones, $7.88. Came with iPhone.
> * Microthin calculator, $4.88. Swipe up on iPhone.
> * Tandy 1000 TL/3, $1599. I actually owned a Tandy 1000, and I used it for games and word processing. I now do most of both of those things on my phone.
> * VHS Camcorder, $799. iPhone.
> * Mobile Cellular Telephone, $199. Obvs.
> * Mobile CB, $49.95. Ad says “You’ll never drive ‘alone’ again!” iPhone.
> * 20-Memory Speed-Dial phone, $29.95.
> * Deluxe Portable CD Player, $159.95. 80 minutes of music, or 80 hours of music? iPhone.
> * 10-Channel Desktop Scanner, $99.55. I still have a scanner, but I have a scanner app, too. iPhone.
> * Handheld Cassette Tape Recorder, $29.95. I use the Voice Memo app almost daily.
> * BONUS REPLACEMENT: It’s not an item for sale, but at the bottom of the ad, you’re instructed to ‘check your phone book for the Radio Shack Store nearest you.’ Do you even know how to use a phone book?
> You’d have spent $3,054.82 in 1991 to buy all the stuff in this ad that you can now do with your phone.
I always found it funny how most economists claim that deflation would be disastrous because customers would keep delaying purchases while waiting for prices to drop further. And yet everyone keeps buying computers even though we've had almost continuous deflation for decades.
Never connected it with the word "deflation", but I guess I figured out a counterargument as a kid: back then, if you bought a mobile phone contract, you'd find yourself regretting it in less than a month, because the same company now offered a better deal; few months later, a better deal with a better phone. And here you are, locked into a static deal for the next two years.
But well, you have to buy that phone eventually, right? So you take the best deal you can find, and stop worrying about it. That's the only sane way.
So in general - customers will delay purchases until the reasons they want to make the purchase outweigh the expected savings from delaying further.
I've also found the reverse to apply: for example, taking out a mortgage, I opted not to hurry despite fast-rising prices, because I judged the money saved on doing it earlier would not offset the mental cost of adding a house searching and mortgage process on top of two other highly-taxing life events.
The Osborne effect is a social phenomenon of customers canceling or deferring orders for the current, soon-to-be-obsolete product as an unexpected drawback of a company's announcing a future product prematurely. The term was coined in reference to the Osborne Computer Corporation, a company that took more than a year to make its next product available, and eventually went bankrupt in 1983.
That doesn't appear to be a real effect for the electronics industry in general. When Apple announces the iPhone 13 consumers keep buying the iPhone 12. Retailers just cut the price of the older model to close out their stock.
The issue here is that for most people (as opposed to highly paid tech workers) these items are all luxury items that are rarely replaced, as opposed to food and energy which are necessities of life. I know a number of university students who are using 4-6 year old laptops to do their work. The fact that they can get a better laptop for the same money is irrelevant because they are spending that money on things like gas to get to classes and work.
Even if you use the nominal value of $1600 as opposed to the "real" value, you're getting way more capabilities.
I bought my 2003 VW Golf brand new from the dealer for CA$ 30K all-in, and after inflation that's the equivalent of about CA$ 40K nowadays. I'd get a pretty good car with much better tech and safety even for $30K, and could get something relatively fancy for $40K.
Pretty sure that only accounts for easy-to-measure headline specifications - for example, it takes into account that people are buying 55" TVs when a few years ago they might've bought 32" TVs, but ignores the fact that you need to buy a 55" TV to get similar sound and picture quality to a 32" TV from a few years ago due to quality reductions in smaller sets. Also, I strongly suspect any methodology using measurements of how much extra people were willing to pay when both were available overestimates the value of the improvements to all the other people who switched to the "better" product when the cheaper one was discontinued, since most of them didn't consider paying the extra to be worth it. For example, if someone needs a flash drive to transfer small documents around buys a 32GB one when they would've bought a 8GB one a few years ago because that's now the option that's cheap to manufacture and readily available, they don't get the same benefit that someone who paid extra for the 32GB model over the 8GB a few years ago did.
Your facts are wrong. At the same price point, the 32" TVs available today have better picture and sound quality than those from a few years ago. Check the archived manufacturer specifications and independent reviews.
They also have ads and harvest viewing data because of "smart" features. I'm convinced that failing to treat collected user data and wasted time as a real cost distorts economic analysis of the modern tech sector.
For example, you could argue that no one is harmed by Google's near-monopoly on search because consumer prices aren't going up (it's still free!). But if you consider data collected and time wasted scrolling past ads Google's services have been getting steadily more expensive for years.
Of course measuring these costs in an consistent, objective way is extremely difficult :(
> calculated by using the price of a standardized basket of things
Doesn't this sort of assume that the needs and wants of society stay consistent over time? I wonder if that is a valid assumption with how fast the world changes these days. For example, smartphones were hardly necessary 10 years ago, but now everyone needs one. And modes of transportation have changed: now we have Uber and a large number of electric cars, which wasn't the case 10 years ago. How could an index that includes things like the price of gas be an accurate measure, if society's needs are constantly in flux?
> It's indicative of inflation overall, but every person's personal inflation rate is different […]
For Canadians, StatCan has a "personal inflation" calculator where you can enter your own bills for their own basket of goods and services and get a personal number:
Maybe we should start using all that data we are collecting from people’s recurring spending and post time series data points.
If people are ordering the same groceries then we should be able to make our own regional data plots.
We dont need the government for this. They need us to support them. And right now thats just this decade long debate about CPI and inflation, which is now accelerating due to the currency supply shock over the last year as people are converted into paying attention to this discussion.
It would be weird to accept it if the basket didn’t change over time.
I don’t care what a farrier charges to reshoe a horse or what a block of icebox ice costs, but I might have only 100 years ago. Surely we’d need a way to include entertainment and lifestyle changes as they happen. 1973 CPI didn’t include any costs for personal computers, Internet service, mobile phones, etc.
A meter that would be of different length every time you would measure something would not be useful for measuring. I'm not sure that it would be made better by including your changing lifestyle and entertainment preferences as they happen.
In Germany that basket regularly changes contents to keep the official inflation at a politically opportune level. People here still believe that inflation is around 3% - yet the prices have exploded.
This sure sounds like conspiratorial thinking - unless you have any evidence thereof. A quick bit of googling found this: https://www.destatis.de/DE/Themen/Wirtschaft/Preise/Verbrauc... which sure seems to suggest the basket was last changed in 2015 (i.e. this isn't something being fiddled by anybody, let alone on a political whim - it's too slow moving for that). And the actual inflation currently using that system is 4.1-14.3% depending on which of the three baskets you're looking at.
Also, consider that inflation numbers are necessarily lagging reality; they're not updated live by tracking residents or anything like that. For example, september's numbers are available and quoted above, but October's are not (and are projected to be higher).
This kind of conspiratorial thinking is harmful; it reduces trust, and thereby encourages everybody to skimp on the rules making everybody worse off. It's a classic prisoner's dilemma - we're better off just not playing that game. I'm sure the process of inflation-computation is imperfect, but let's talk about concrete, verifiable problems or better yet suggestions for improvements instead of nebulous feelings of disagreement.
By the looks of it, the official statistics confirm that inflation is spiking, but simply not yet to dramatic numbers (i.e. the kind of numbers that instantly change how we all think about money). If you feel that inflation is significantly higher, then why?
The official numbers are around 4.5% to 5% and everyone knows it's a combination of higher energy prices, more taxes (VAT rebate is gone, CO2 tax is up), shortage of materials and reopening of the economy.
This is the same administration that claimed we saved $0.49 on a 4th of July BBQ this year, bec they cut out all the meat compared to the BBQ last year. I’m sorry but you can explain all you want. I’m not buying it (at any price)
There's a bunch of complaints about other prices, and people pointing out the prices are up 8% since 2019, but I don't see anything about "cutting out all the meat" and I don't see the number 49 anywhere.
And the ground beef had the second biggest percent drop in price in that list, anyway.
Yea that's the tweet. First, it simply doesn't match people's own experiences, or the govt's own data. The tweet says ground beef is down 8%. However, somehow, in September (just 2 months later) inflation data showed beef was up 12% YOY: https://www.npr.org/2021/09/14/1036678722/chicken-beef-pork-...
Secondly, to somehow think 16 cents -- in the middle of a pandemic -- is worth a high-five, a bunch of jokes, and evidence that "the Biden economic plan is working" (what economic plan? nothing has passed yet), just shows that this administration is absolutely tone-deaf when it comes to the people it supposedly represents.
> Secondly, to somehow think 16 cents -- in the middle of a pandemic -- is worth a high-five, a bunch of jokes, and evidence that "the Biden economic plan is working" (what economic plan? nothing has passed yet), just shows that this administration is absolutely tone-deaf when it comes to the people it supposedly represents.
I think a mere "it hasn't gone up" would be a reasonable thing to be happy about among all the inflation. I wouldn't say "the Biden economic plan is working" about it but I feel like the criticism went to unreasonable places.
You’re right. Sorry I did see that tweet when it originally was posted, in previous calculations I remembered there being other foods, which they took out to get to their calculations. and this year they congratulated themselves by taking it out to save money. I commented off the cuff at 3am my time, I should have done a litte bit of research beforehand.
The Tweet you noted is the official tweet on this. The parent quote is relying on existing "rebuttals" of that post by conservatives, which have eventually become broken telephone to the degree that the parent comment believes Joe Biden banned meat to falsely reduce the cost of July 4th.
It's funny because the actual quote is stupid enough -- trying to emphasize some marginal rounding error national savings on 5 pounds of meat when the entire world has been exploded for the last two years is a baffling claim and an obvious attempt to put lipstick on the whole situation, these guys are absolute clowns, and the April-onwards hubris of "COVID's over, we saved the day!!!" is just a national embarrassment.
The specific "ban meat" bugbear has been a very active talking point among conservatives. You see, the Green New Deal (which is predicted in the book of Revelation) involves Andrea McDonald-Cortisol personally banning you from eating meat.
The ground truth at the heart of it is that the Green New Deal, which is as much an expression of intent as it is an actual policy document, correctly notes that cattle raised for beef contribute to greenhouse gasses (both through methane production, CO2 production, and clear-cutting of valuable carbon sinks to produce grazeland). This is of course indisputably true. The document doesn't actually prescribe any restrictions on meat so much as it acknowledges that the size of meat's contribution to our climate economics makes it unlikely we'll hit long term targets without rethinking our relationship with meat.
Compound that with the fact that some liberals, including Barack Hussein Obama's awful wife!!!!, did initiatives like a "meatless monday", and you have all the proof you need that liberals are banning your meat.
It is less clear to me who is the first particular commentator to combine the "Biden is going to ban meat (and guns, and god, and everything else you hold dear, which is not a surprise because he stole the election, and he's senile)" argument and the "Biden claimed the 4th of July will be cheaper which is false because we have Zimbabwe level inflation" argument.
A few random sources of very concerned RW commentators talking about liberals taking away your meat, all before the present controversy:
As a commentary on the power of information bubbles, I weakly follow a handful of conservative figures. Yet this is the first time I hear about this particular Joe Biden comment, forget about him banning meat to accomplish the feat.
Funny enough, I just noticed that your sources are liberals dunking on conservatives. Oh dear, this is as far deep down the partisan insanity of contemporary US discourse as I'm willing to go.
Lol. That’s quite the strawman you built me up to be. I saw the original tweet back when it was posted, I just remembered previous years had buns for those burgers, I misremembered what they had taken out and commented off the cuff.
No where did I say I thought Biden was taking away my meats (smoked or otherwise), I’m not really sure how to respond to any of the other lies you posted about me but to call them outright lies that shouldn’t be part of any civil conversation between two human beings that don’t know each other. It strikes me that you came up with a conspiracy about me to lampoon right wing conspiracy theorists. Who really is more ready to believe lies?
The HN crowd in general is upper-middle-class and therefore not really all that price sensitive. If name-brand cereal X doubles in price, HN buys it, logs it in a spreadsheet, then notes that the price went up. Middle-class Joe will look at the price, call BS, and go with an alternative that didn't arbitrarily raise their prices.
I think what's going on here is a lot of profiteering because there's an easy way to raise prices without looking like a villain. More so than ever before, companies, suppliers, and stores can raise their prices arbitrarily, and easily blame the pandemic and "supply chain issues" without a huge amount of consumer blowback, especially from the upper classes.
You know, reading all of the replies, some in stark agreement, some essentially calling me ridiculous (no offense taken), I think you've hit the nail on the head.
I've been in the camp of price insensitive - to a degree - I buy things I'm used to and watch prices go up and up and up. Someone who is more savvy and perhaps open minded doesn't see such increases. So we both think each other are crazy when talking about expenditures.
That actually helps me understand both sides - so thanks for putting it plainly.
It's interesting to me to go back and reread all the replies with that mindset. Seems there is much disagreement as to which more accurately represents expenditures.
My wife actually works in the retail analytics industry. They're all buying up data solutions and hiring analysts and data scientists. You bet they have algorithms that spit out "increase the price of kombucha in San Francisco, you'll see your profit margin increase with no downside."
I think the manufacturers probably have the least leeway; it'd be very easy for shippers or even the grocery stores themselves to just jack up prices where they see fit.
Combine that with large grocery stores getting more data-driven it's kind of a no brainer for them to pick items they know they can increase the price of without blowback
The blowback will not be felt at the grocery stores, it will be felt in the political process. The demand for cereal in a typical American home is not elastic. It will be bought and consumers will collectively distribute their ire elsewhere.
Mom: "whelp, we tried the democrats and now my groceries are outrageous."
Gasoline, rent, shit service...it is not going unnoticed. I quit going to Starbucks because I had to wait a half hour for a simple menu drink every single time, busy or not. I can just stop going there...people can't stop buying cereal and milk, rather they won't and now have elevated expectations of government to control prices and their general well being.
I don't experience much inflation. In fact, I don't see any in my budget. I know everyone says prices are getting higher, but we've actually tracked our expenses the last 2-3 years, noting down every little expense in a spreadsheet, and I don't see any signs that prices are rising.
Our supermarket expenses are the same as before, even slightly smaller. Our rent is the same although our landlord legally could have raised it if he wanted to.
All in all, we spend less money than before because:
- we don't commute,
- we barely eat out,
- we buy less clothes when staying home,
- we travel a little less.
The last big purchase we made was a flat screen TV. It costed less than the 10 year old TV it replaced but is so much better.
Electricity and heat have gone up. That's all I see in our budget that has gotten more expensive.
There are purchases we haven't made because they are stupid expensive at the moment: We don't buy shares, we are postponing buying a house, and we have been postponing changing our car. I would have liked to buy a new laptop, but the specs of the new ones look like the 4 year old I have, so it feels wrong.
Could it be that we just have higher prices on some items and assets and that the CPI and mainstream economists are generally correct?
I cannot imagine what you buy that your groceries have not increased in price in the last eighteen months. We too track every expense, and the grocery costs have increased 20-30%.
For what it's worth, his experience mirrors mine. I don't itemize down to extreme detail, but my wife and I actually do more cooking at home now in the last 1.5 years than we did previously yet our average grocery bill is actually down about $12 a week this year. Honestly, it's kind of shocking.
And before you ask: No, it's not because we switched from buying prepackaged/processed food to raw ingredients. We just order-out less.
Some of it might have to do with the fact that I live in Chicago, a major logistics hub, in a middle class neighborhood that has price-sensitive consumers and multiple major grocery stores.
It's plausible, but not on a medium to large scale. Of all my consumption expenses, certainly coffee has gone up per cup, but everything else is roughly the same.
Oats, deli meat, fruit, pasta, that's about it. Canned beans have gone up a little, maybe butter too.
Last month was the lowest spending month our household has had in nearly five years, for what it’s worth. And that’s with some home renovation (DIY) and a new hobby.
The biggest factor for us is changing what we buy, not prices. Buying less alcohol and fewer pre-packaged foods has made a huge difference in our grocery bill.
Is it possible that on the high end of expensive groceries it hasn’t gone up as much? For instance a 12oz bag of my favorite coffee beans were $20/bag in 2019, they’re still $20/bag…
You spending less money on stuff has nothing to do with inflation, though. And your point becomes kinda moot when you intentionally skimp out on things you feel have become too expensive..?
“We’ve intentionally avoided purchasing things because they’ve gotten too expensive” sounds like the perfect way to prove exactly the opposite of your point.
It's not really reasonable to extrapolate from one of the richest, most expensive places in the world. Manhattan has a unique set of circumstances that drive prices there that often do not apply anywhere outside of the NYC metro area.
The article is addressing a problem in industries you're admittedly not using much of, so you're probably not feeling what they're talking about.
But you do mention travel and eating out. I think you would find if you tried to do the same amount of travel and eating out that you used to do, you would notice that you're getting less for your money than you used to in lots of little ways.
Counterpoint, we travelled this year and got two flights for the price of one. The refunded flight from early COVID days literally paid for both. Even after somewhat expensive COVID testing costs, still a significant saving.
Sure, now that travel restrictions are causing less uncertainty and demand is ramping up, this might not be repeatable. Perhaps hotels are skimping, not sure as we stayed with family. Either way, there's always some subjectivity in use cases and that can easily tilt the scale one way or the other.
Going to telework can save loads of money but this is irrelevant to the parent point. Not everyone can do this either. You can’t telework manufacturing or service jobs.
What makes inflation tricky, both in terms of calculating easily but also in terms of being easily fudged are substitutional products.
Inflation is measured by the price of a representative basket of products. And what’s reasonable to put in that basket today, might not be reasonable tomorrow.
If beef explode in price, people aren’t going to buy steaks, so maybe it makes more sense to change the index away from steaks to pork chops. It’s both a cop-out and the only reasonable thing to do.
The national isn’t poorer just because caviar went from almost free to extremely priced over a century.
At least for the European Central Bank, housing is the single largest item in the inflation basket - entered as something called "imputed rent" - how much would it cost to rent an equivalent dwelling. This item alone accounts for 7.5% of the overall index.
Adding housing maintenance, heating, water supply, etc. - the entire housing category climbs up to 17.8%. Which sounds like a totally reasonable estimate to me - young people and urbanites pay more, older folks and people in rural or provincial towns pay much less. From my personal experience - housing and related expenses were ~50% of my income while paying down mortgage, down to ~7% after the loan was repaid
Oh, but there is. Move in with roommates in a bad part of the town. See the dentist only to pull out excruciatingly painful rotten teeth. Leave small kids home alone, perhaps pull their older sibling from school to babysit for free.
I'm talking about pre 2019 numbers. Housing costs were usually around 3% but remember, you're not spending your entire paycheck on housing. Cheap Asian widgets are going down in price and drag the index down. Expensive housing is dragging the index up and we then end up in some limbo between 1.5% and 2%.
But still, something needs to be said about worse housing/medical treatment/child care vs better chinese widgets. Seems like in the whole quality of life is getting worse for most people and money is actually losing it's value when it comes to the things that actually matter. Or am I not seeing this right?
The CPI doesn’t reflect your personal preferences. It’s an average across the entire country. Have you ever known the entire country to agree on anything?
The Fed massages the inflation rate by throwing out "extreme" deviations.
> Mr. Powell used a gauge from the Dallas Fed that throws out the top 31% and bottom 24% of personal consumption expenditure (PCE) price changes, and was bang on the Fed’s 2% year-over-year target in July, the latest available. An alternative measure from the Cleveland Fed strips out the top and bottom 16% of consumer-price index changes, and was far higher; worse, the monthly rate was unchanged in August from July, giving no support to the idea that inflation is already coming back down. [0]
> The Fed massages the inflation rate by throwing out "extreme" deviations.
The rationale is valid though. Price-conscious consumers would simply switch brands, stores, or even go for substitute goods if the price of a particular product they chose happened to skyrocket for no reason while the price of all other alternatives barely changed.
It's not valid though. Inflation driven substitution means lower quality. You used to barbecue steaks every weekend. Now you can only afford bologna. You used to wear leather shoes. Now you can only afford plastic crocs. Etc, etc, etc.
Depends on the degree and the duration. If the local slaughter house has to shut down because of Covid and steaks triple in price, does it really make sense to indicate that inflation is ~50% (number made up) over my basket of goods? Or does it make sense to acknowledge that I’ll shift over to chicken or no meat for a few weeks until prices return?
Similarly, if the price of beef permanently puts it out of reach for my family, then I absolutely would call foul on substituting it from my basket of goods. That would be inflation, and excluding beef would be gaming the system.
The problem is that determining between these cases is very hard to do in the moment, and only becomes obvious in hindsight.
> It's not valid though. Inflation driven substitution means lower quality.
It really is valid. Not only is it valid, it's precisely the whole point of tracking a consumer price index. The goal of CPI is to track the prices of goods and services consumed by the population, not brand- or product-loyalty. When prices go significantly up, it's a known fact that consumers react by seeking affordable alternatives, or in the case of luxury items simply going without.
Toy model: There are 10 goods you buy. They're reasonably substitutable for one another (maybe they're different foods, or types of computer game, or something).
Every year one of these increases in price by 20%. A different one every year, cycling between them all. So every 10 years, they all increase by 20%, an effective inflation rate of about 1.8%.
We have a price index based on a basket of these goods. At the start of year 1, our basket contains equal quantities of all the goods. In year 1, the price of good #1 abruptly goes up 20%, having been stable for the last ten years. OK, we say, this is a thing that's experiencing some sort of anomalous increase in price, so we'll take it out of the basket. At the end of the year, we look at our basket of goods 2..10. The prices haven't increased at all! Zero percent inflation! Splendid.
At the start of year 2, our basket contains equal quantities of goods 2..10. In year 2, the price of good #2 abruptly goes up 20%, having been stable for the last ten years. Another anomalous increase. Better take this one out of the basket too. At the end of the year, we look at our basket of goods 3..10. The prices haven't increased at all! Zero inflation again.
At the start of year 3, our basket contains equal quantities of goods 3..10. In year 3, the price of good #3 abruptly goes up 20%, having been stable for the last ten years. Dang, better take this one out of the basket. Our basket is getting a little short of this kind of good. Hey, good 1 has been stable for a couple of years after its blip in year 1, let's put it back in. At the end of the year, we look at our basket of goods 1,4,..10. The prices haven't increased at all! Zero inflation.
And so we continue. Each year we remove an item that obviously doesn't belong in the basket because it's suffered an anomalous increase in price, so of course consumers will be switching to something else. Sometimes we put back in things that have been stable for a while. Every year we get an inflation figure of zero.
And yet, somehow, ten years after we started all the prices are 20% higher. How on earth did that happen?
Great, so when prices increase so much people can't afford to buy something there's no inflation with regard to that item. That's handy.
You're right, I suppose the homeless don't experience inflation in housing costs, therefore it doesn't exist!
This is as beautiful as the NSA's redefinition of surveillance whereby they only collect _all_ the data they can. But it's not surveillance until they look at it, which they assuredly don't because there's so much of it.
Further to the point above, when this happens the GDP drops. These metrics need to be looked at in combination with each other, not in isolation. There is no "one metric", its a series of metrics that tell a story.
If the economists track the price change in 5 brands of spaghetti and report on the median, that would represent people seeking alternatives, for sure.
But if they track the price change in 1 brand of spaghetti, treatment of 1 broken arm, and 1 million-transistor CPU? Those aren't goods that can substitute for one another.
CPI is a good method to measure inflation, but it's managed by people who have an interest in getting a low number, so it is a poor measure in practice.
> right, so CPI is not a good measure for actual inflation
No, quite the opposite in fact. CPI is a accurate measure of inflation as it tracks how much the real-world consumer prices vary where it really matters: real-world consumer expenses.
Perhaps the mistake you're making is assuming wrongly that demand for specific brands/makes/models is perfectly inelastic and consumers do not change their consumption patterns at all even if their price increases so much that they can no longer afford them. Meanwhile, if a low/middle class family sees the price of stake skyrocket, you can bet they'll start to switch a few meals to hamburguers or hotdogs.
The argument is that there is no inflation if people can't afford stuff, because they'll just be priced out and forced to not buy stuff anymore, thus their expenses will be stable. Duh. Inflation is not how much money people spend, inflation is ever increasing prices leading to people affording less and less stuff with their rapidly depreciating money.
If inflation happens and food becomes more expensive and you keep buying the same food you have less money left over for non food products. The CPI will adjust and weight your food expenses more which will raise the CPI much faster than if it also looked at fitness equipment that went down in price because you didn't buy it because food was too expensive.
If food gets more expensive and people don't spend more on food then inflation didn't happen by definition. They still spend the exact same amount after all, they just got different food instead.
That is exactly how the ruling class sees the situation. Gallon of milk $10? Chump change, maybe once it hits $100 it will make for a bit of faux concern table chatter at our $10k/seat fundraising dinner next week. The plebes agitating for $15/hour? Catastrophe.
If inflation means measuring value of money over time, substitution is not correct. You could substitute before - you just didnt, because it was not necessary. With a measure you describe we can slide into poverty and it doesnt show.
Yet it is so far from rigorous which makes it ripe for abuse. The "extreme" deviations are defined arbitrarily, evidenced by the fact that different offices of the Fed come up with different inflation numbers. Hence the chairman can choose one which is conveniently on target.
Here's an interesting experiment I recommend for anyone believing ShadowStats as anything but nonsense. You can prove it yourself quite easily.
1. Take ShadowStasts claimed inflation (dig, you'll find their historical graph), which they generally have much higher than BLS rates, and take BLS rates, and compute the compounded inflation over say 20-30 years.
2. Pick a decent batch of things you buy: housing, rent, food, gas, cars, etc. (making your basket of goods - scale according to what you spend on them, like a normal basket of goods would do)
3. Find ads from now and from the start of the timeframe. Gather prices. Put in Excel or Google Docs
4. See which is more accurate: BLS or ShadowStats.
5. Conclude ShadowStats is absolute nonsense, and ban it from your thinking, since you just proved to yourself it is nonsense. Reading it makes one significantly less connected to demonstrable reality.
The first time I did this it was amazing how far ShadowStats was from reality. I've been recommending this to friends for years - most realized what nonsense it is and learned to see if there's simple ways to check things themselves. And this is an easy test anyone can do with a little effort.
ShadowStats writes for a specific audience: people who distrust official statistics in general, and inflation statistics in particular. As you can see in this thread (and likely also by talking to most people you know personally), this is a sizable group, so it's likely a pretty good, sustainable business, just like health/diet fads or self-help books. The story does fall apart under scrutiny, but the susceptible audience is replenished faster than the claims can be debunked.
Amusingly, highly educated people who are disdainful of anti-vaxers or Gwyneth Paltrow quackery can easily believe that inflation is an order of magnitude higher than officially reported, or that they the evil/incompetent bureaucrats leave out food, shelter, healthcare and/or energy costs from the calculation or some such.
As an academic economist turned machine learning/SWE, I'd say there are plenty of knowledgeable people around on HN, but on matters of economics and health, the signal-to-noise is definitely much lower than on anything related to computers.
Agreed. It's why over the years I've come up with experiments like the above that I can give to capable yet deluded people to check things on their own. It amazes me how many otherwise smart people eat the huge amount of crappy, conspiratorial economic nonsense widespread on many forums, including unfortunately a lot of HN and Reddit threads.
It's why I love such clean examples as the Shadowstats nonsense. It's completely debunkable in an hours work.
The criticism I’ve read of ShadowStats is that they don’t actually recompute inflation using different methodology—they just add a constant of their own choosing to all the official inflation figures.
This chart isn't remotely plausible. No legitimate difference in reporting mechanisms or standards would exactly match every upswing and downswing - if you're weighing the basket differently, you'll get spikes at different times. They have to be just making up a constant value and adding it to the official statistics. (You'll note that the reporter in the linked article didn't ask anyone other than the people who made the graph whether it made sense.)
Tell that story to the government bond markets. The investors would love to hear those numbers and instantly demand 10% interest...
No, I'm serious. If these numbers were accurate then you wouldn't even be able to make money off the stock or housing market. Everyone would be losing money.
What's it like falling for literally fake news? If those charts don't set off your bullshit detector... Well... You should probably stop trusting yourself on many things.
> So, here we are 3 years later and the price for a Shadow Stats subscription still hasn’t budged! At $175 for a year long subscription, you still get the same Shadow Stats. The cost of the subscription has remained the same even as inflation has moved higher. So, in real terms, there’s actually been deflation in the cost of a Shadow Stats subscription.
I guess I’d be the outlier in your friend group. I haven’t noticed a significant change in our regular grocery bills. Optional purchases by and far dominate, and the biggest factor for our grocery bill is whether or not we bought alcohol, not the change in meat prices.
Aside from rent, the only things I’ve noticed significant price changes in have been items undergoing acute supply shocks, such as lumber. And most of those have calmed down since mid last year.
Customer price index is based on average consumer behavior. The tricky thing is that consumer behavior changes when prices rise. For example, when the price of meat rises, consumers start substituting it with cheaper alternatives. If the old basket was $50 and the new one is $50, then there's no inflation.
Saifedean Ammous writes about this in his new book, the Fiat Standard. The chapter about fiat food is available online. [0]
> I'm older, so I have 'habits' that don't tend to change.
> So what is the government reporting?
In addition to CPI, the government also reports CPI-E for elderly consumers. It is generally higher than the more widely used standard CPI (all urban residents).
They report things that make them look better. Generally that makes inflation look lower than it is.
For what it's worth, I'm fairly young but I have similar issues to yours. If you mostly buy essentials, the costs have been rising very fast, much faster than salaries do for the same functions.
You live in a different part of the country than almost anyone else. The goods you buy, even in your area, can vary significantly. If you're trying to buy a gallon of milk, things aren't so different. A car, yeah that's gotten pricey. But your anecdotal experience is no reason to doubt the statistics on what is happening broadly.
But it's important to distinguish between a house and housing.
A house is a capital good that provides housing/shelter. So if the prices of houses got really expensive but rent stayed the same that wouldn't show up as inflation.
100% this but the macroeconomics of it are simple, by pushing low interest housing and food goes up astronomically so the economy ends up with the backbone of the labor force (>$20/hr) being priced out of everything.
The only fast solution here is subsidizing living which many governments are doing but it won't fix the problem they created in the first place and now they have to deal with either dramatically raising rates and saddling the people with horrendous debt due to bond yields and defaulting, etc or riding it out and lying about real inflation with small raises.
I think food prices are going up as a combination of three factors:
1) PRIMARY factor. The rent is too damned high. It has been and people have been cramming together like sardines; but just like the car rush as PPE bubbles, now people want all the housing everywhere even MORE than the last 30-50 years when it wasn't being built sufficiently to accommodate demand by jobs.
2) The lowest end workers finally got enough of a lifeline, even if only for a short time, to realize how badly they were underpaid and how much they need to really have a modestly OK life. Combine with all the services that let them work in the first place (care for children, like daycare and schools) unable to provide due to the pandemic and this is hard-stalled between less workers and workers who hold out for more in what is finally a sellers market.
3) I don't have first hand observational data on this, but my gut feeling is that it's harder for businesses that used to do under the table work with citizens / undocumented immigrants to fully staff, and all the more likely for the pandemic to harm tightly packed workers in processing places. It would be nice to hear more about documented guest worker programs that legitimize migrant worker practices, while also ensuring that they're paid enough to discourage undercutting the local job market.
I'll also note: Rent affects the businesses too... and food prices might go up based on their (mistaken) belief that consumers can afford to pay more. I have cut back to lower quality options and rarer treats for some options in the last half year as prices have risen past the points I'm willing to buy at.
Food availability is also suffering. I haven't been able to find wings at a Zaxby's in months. Many places have switched to lower quality ingredients, like Wendy's switching their buns and chicken breasts.
That's not at all the cause. It's because our supply chains and logistic networks are very tight for maximum profit and efficiency.
Any disruption, like 500,000 people dieing unexpectedly, trucks being diverted to carry medical supplies or toilet paper and any overseas part delivery delays cause large ripple effects. Millions, if not billions of broiler chickens were disposed of over the last year because they couldn't get delivered or processed. Similar situations are happening all over, we are getting fewer and fewer trucks on the road each week due to routine mechanical issues that can't be fixed because the parts aren't available.
The logistics problem is continuing to spiral, ships backed up are now not returning on time so factories are backed up and forced to shutdown production.
People not in production and logistics are severely underestimating how bad this is going to be. This is the beginning of the shortages.
This makes me wonder about competition. Theoretically if there's competition, one food provider could offer food for the old price, or halfway in between and attract all the consumers and make extra money from the additional business.
For what is worth, my personal anecdote is different: my rent went slightly down (renewed in August, in Boston) and my grocery bill has not moved in a noticeable way (middle class vegetarian with Mediterranean tastes).
Also keep in mind that groceries, or rather food in general, only comprise in the neighborhood of 10% of the average household budget. So if we're just talking about food, if you're paying 50% more, that is just a 5% increase in your overall expenses.
And as far as your rent going up by 30%, that's offset by some people whose rent actually went down by a lot during the early pandemic when people were fleeing the cities and bargains were to be had. And some people who don't pay rent at all, but pay fixed-rate mortgages which will go up by zero percent over the life of the loan. So you can see how that could significantly nerf the total inflation affecting that household.
I live in Switzerland and a few cents seems accurate. A lot of the current increase I see is based on the bad summer harvest tho and less external factors.
Either it's a Swiss thing, or because we buy the majority of food semi-directly of organic farmers and prices haven't changed that much in this sector.
CPI(~5%) is a go-to measurement because it attempts to avoid geo-politics. However, has a blind spot for the very fundamentals of inflation.
PPI(~10%) is a late stage measurement that doesn't avoid geopolitics. However, because of government policies it's said to have become useless. Yet still considered better than cpi.
Oil as a measure. When geopolitics are screwing with it, everyone knows. It's under immense abuse right now. Yet it's recent low because of covid was ~$20/barrel and it's up to ~$83. Or if you account for covid, it's up ~30%.
M2 money supply? It's got 40% inflation locked in, but that wont show up in a single year.
Call me crazy but PPI seems on the money. Geopolitics seems to be the biggest player in the game right now.
My rent, as did most rents in my area went down. I expect next year will be a modest increase, certainly less than other increases in the recent past. While goods are clearly more expensive, it doesn’t feel anywhere close to 20% more.
Maybe its not as common as i thought. Here's an example in canada https://en.wikipedia.org/wiki/Tribunal_administratif_du_loge... . Several, but not all provinces in Canada have similar administrative tribunals instead of the normal court system to resolve resedential rental disputes.
The effective purpose of CPI is to be the rationale for credit and monetary expansion. Without that, the housing and stock markets would be left to drift freely.
The exact mechanisms behind something like CPI are probably secret to prevent manipulation by outsiders, but I also suspect it's difficult to even confirm that.
They're transparent about the mechanisms in general, but plenty of the mechanisms are arbitrary by nature. The article discusses hedonic adjustment for instance. That isn't a scientific or mathematical change. That's people at the fed making personal judgement calls about how good the iphone 12 is vs the iphone 11, and adjusting the price increases on the basis of that personal judgement call.
If you open the link you shared, you can see they make hedonic adjustments for men's suits, the first item in the list. Are suits today really much higher quality than they were 10 years ago, necessitating a decrease in the actual price inflation of a man's suit? The fed thinks so, but they don't share the details of why or how much hedonic adjustment men's suits deserve.
The published numbers are opaque. There is no way of confirming what mechanisms are used since the data is secret. See the paragraphs on data confidentiality.
The government tries to guess which prices ratchet only up (e.g. new cars) and which prices rise and fall (e.g. gasoline). They then report the inflation rate on the ratcheting goods only, because that should be more predictive of what's going to happen in the future.
The price of real estate isn't included in the CPI, nor should it be. Purchasing real estate is an investment, not a consumer expenditure. The CPI does include rent and owner's imputed rent.
> Purchasing real estate is an investment, not a consumer expenditure.
Yeah I remember when I was living under a bridge and then decided to invest in Real Estate.
Renters have a greatly impaired ability to build wealth. If everyone has to rent except "investors" then there is no more middle class. In a market that is majority renters landlords can raise rent until it consumes virtually all surplus:
The CPI is correct as the CPI is defined, but that's circular. I can index inflation to the number of nose hairs in the President's nose if I want. The question is whether it's a meaningful statistic for driving a policy that benefits anyone except the government or the financial industry.
The CPI should include the cost per square foot of residential real estate. It should also be weighted heavily toward necessities like food, energy, education, and health care, which perhaps coincidentally are hard to outsource and therefore are more directly influenced by domestic inflation.
Nonsense. That's like claiming the CPI should include the price of gold bars or mutual fund shares. You completely missed the point of the CPI. It has nothing to do with building wealth.
CPI is heavily weighted toward necessities like food, energy, education, and health care. You would know that if you bothered to read the documentation.
> The CPI should include the cost per square foot of residential real estate.
Other websites follow that [0] and interestingly enough, median inflation adjusted price per square foot across the entire country hasn't really budged in decades although covid could have messed that up these pasts 2 years. Of course, if you want to live in a geography constrained location like the west coast and northeast, that does not really help you but you need to work with their local governments as that is a local problem and not a federal one.
If the purpose of buying real estate is to build wealth, then it is, by definition, an investment. If the purpose is to provide shelter, it is not.
In practice, people buy houses both as an investment and a shelter. So the CPI attempts to ignore the portion of the purpose that functions as an investment.
You would think that there could be alternative geographical price indices created with help from companies that aggregate this data regularly (grocery apps, travel apps, etc).
Note that the CPI in the SF bay area has been >2% for over a decade and has been 3-4% since 2016.[1] This is noticeably higher than the national rate of <2%.[2] Until 2020, that is, when CPI dropped in the SF bay area but skyrocketed nationwide.
Yeah, I am concerned with the methodology more than the reporting.
> 11. How are CPI prices collected and reviewed?
BLS data collectors visit (in person or on the web) or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. We record the prices of about 80,000 items each month, representing a scientifically selected sample of the prices paid by consumers for goods and services purchased.[1]
> The CPI survey collects about 94,000 prices per month to compute indexes for commodities and services. Approximately two-thirds of price collection in the CPI is done by personal visits of CPI data collectors to brick-and-mortar stores. The remaining data are collected by telephone or on the outlet’s website. In some cases, these data are supplemented by data provided from other sources. The outlets where prices are collected are selected based on data from the CE survey. These outlets may be brick-and-mortar stores or websites (e-commerce); currently, about 8 percent of CPI quotes are collected from outlet websites.[2]
This seems easily biased and inefficient when considering theoretical alternatives.
$11 -> $17 in 4-5 years is ~9%/year. High, but not 20%, like the parent post claims.
CPI actually claims meat and poultry inflation is 10.5% (https://www.bls.gov/cpi/, click Food -> Food at home -> Meat and poultry), so that's not far off eitherr.
I don't think there's any lying going on. It's just that not everything is inflating at 10.5%, and the CPI is just one number describing the whole economy, and you probably mostly notice the things inflating the fastest.
You’ve chosen the one thing that has risen in price the most…steak. Why do you think you’ve done that, and is ribeye steak a very necessary part of your diet?
ribeye is not the cut that most people are buying. In a supply chain challenged environment with rising wages, premium cuts of beef are seeing price increases, but this is not evidence of outsized inflation. Also, if you want delicious beef, there are lots of other options both in cuts and preparations.
I do understand this point, but am trying to be honest as a consumer. My family has only ever really liked ribeyes. If they've doubled in price, that affects us. That say, stew meat or london broil didn't doesn't affect our bottom line.
It's not a ridiculous statement if everyone is saying their particular favourite product has gone up in price significantly more than inflation, as the original post (https://news.ycombinator.com/item?id=29063208) in this thread does.
If all the products have increased in price then inflation is higher than reported.
The level of luxury people get acclimated to is pretty amazing. I'm trying to imagine the response I'd have received if as a child I had demanded ribeye regularly, or what my grandparents would have said if they heard it discussed in such a manner today, as a product deserved at a cheap price (I gather your family can still afford it.)
I think you might be getting to the core of the reason these replies have gotten so crazy. Measures like CPI are meant to estimate the expenses of a typical middle-class family. HN is full of people who fancy themselves typical middle-class, but in fact are not.
So higher inflation in premium goods is seen as a crisis. Notwithstanding how fast we'd cook the planet if everyone demanded ribeye every week...
You've stated the point well: there are substitute beef products that haven't seen the same price increases. This is not the same as me general inflation, or nearly as concerning.
> My family has only ever really liked ribeyes. If they've doubled in price, that affects us.
A particular consumer's habit of consuming very specific high-end goods or services which is immune to substitute goods is not how inflation is determined. It would make as much sense as claiming inflation skyrocketed because you only wear Air Jordans and the latest model is sold for around $200 while last year they sold for $120.
Same experience from friends all over the world. From fuel to core essentials its running at 20 to 25%.
If we talk US current official status is:
----------------------------------
"In July 2021, the Consumer Price Index increased 0.5% from June to July, slower than the 0.9% month-over-month increase from May. When compared to the year prior, the full index increased 5.4%, making it the largest 12-month increase since 2008."
"The CPI is a product of a series of interrelated samples. First, using data from the U.S. Census we select the urban areas from which data on prices are collected. Next, another sample (of about 14,500 families each year) serves as the basis for a Telephone Point-of-Purchase Survey (TPOPS) that identifies the places where households purchase various types of goods and services, forming the basis for the CPI outlet sample. Using data from the Consumer Expenditure Survey, BLS statisticians assign quotes in the CPI item categories to specific outlets. A specific item is then chosen for selection using a process which bases the probability of selection for an item on the share the item composes within the outlet’s revenue in that item category."
"Recorded price changes are weighted by the importance of the item in the spending patterns of the appropriate population group. The combination of carefully selected geographic areas, retail establishments, commodities and services, and associated weight, gives a weighted measurement of price change for all items in all outlets, in all areas priced for the CPI."
"Two different price indexes are popular for measuring inflation: the consumer price index (CPI) from the Bureau of Labor Statistics and the personal consumption expenditures price index (PCE) from the Bureau of Economic Analysis. Each of these is constructed for different groups of goods and services, most notably a headline (or overall) measure and a core (which excludes food and energy prices) measure. Which one gives us the actual rate of inflation that consumers face?"
> For someone like my family, I wouldn't believe any number less than 20%.
For that to be true, on average the price of every single item in your groceries list has to increase over 20%.
Can you provide a single example of an item in your groceries list whose price increased over 20% during 2021? And which item increased in price the most?
Right, but you're specifically referring to energy price inflation - and a quick bit of googling find widespread (and mostly worldwide) agreement that energy prices are spiking faster than other prices. But energy, while crucially important because of knock-on effects, simply isn't a dominating factor directly in most peoples expenditures.
Now, you could reasonably make the case that we should therefore expect future non-energy inflation to follow since energy is a cost in pretty much every step along the supply chain. And that's fair! ...but it's not a sign the official figures are fudged either; after all, it takes time to collect figures, and it takes time for retailers and everyone along the supply chain to update their prices. Given an energy price spike, it's totally normal to see the energy price inflation spike a short time (1-2 months?) later when the figures are next updated, and then see goods inflation spike (less highly) a month or two after that. If everything aligns perfectly and businesses and data collectors act quickly, maybe a little more quickly - but never immediately.
So we should expect to see e.g. gas prices rise first, and then other goods, all while not yet immediately being represented in official figures.
If, after a few months, a perceived price spike wasn't captured by the official figures, then it's time to start worrying - and even then, not every worry turns out to be founded.
Yikes, is this the US? Just a reminder that things like this are incredibly regional based. I still pay $1.79/lb for chicken breast and 3.50 for 80/20 ground beef in Richmond Virginia.
And gas goes up and down for a variety of reasons.
I live in a fairly HCOL area in a state with some of the highest gas taxes (California). Gas is $4.19/gal* and ground beef is $6/pound. So my guess is that they're in the Bay Area OR just shopping at very expensive places
*Here in Los Angeles there's a handful of gas stations that inexplicably charge $1-$2 more than any other one. I always assume it's either money laundering or they just prey on people who aren't paying attention. $4.19 is just the cheapest price I've driven by in the last 24 hours
gas was 5.05 in the bay area today. not sure what the price of ground beef is but my steaks i buy went from $20 to $25 over the last year and they're worse quality
The high gasoline prices in California are due more to state government policies that have artificially restricted supply. The state requires a special blend that's not really used anywhere else, and they don't allow construction of new refineries.
> The high gasoline prices in California are due more to state government policies that have artificially restricted supply.
To the extent that's true (and its a rather including incomplete story) as an intermediate cause, those policies themselves exist to meet federal pollution mandates, which California has, and even moreso in the last had, particular population and geography challenges with, particularly in the LA basin.
True, but it affects people both directly and indirectly since the majority of goods is still shipped with trucks.
So, IMHO, it makes sense to use it as AN inflation marker, but not the only one.
If you think inflation was 20% over the past year, that's equivalent to saying someone's salary going from $100k to $119k in a year has resulted in them being poorer. That just doesn't pass the common sense test, IMO.
You'd actually need to make more like 125k to maintain a 100k standard of living through a 20% inflation event since you're taxed on the "extra" income.
There is an obvious problem with fixed salary work contracts since the death of unions and bargaining power but come on. Everyone knows you're supposed to switch jobs to get more money by now. It's what the employers implicitly have agreed upon.
Many older people saved large amounts of money in their bank accounts, and were expecting to live off the interest in their savings account once they retired. The interest they were due was effectively stolen when the central banks started giving away free money, it was a massive transfer of wealth.
Many of that same generation counted on Social Security, and CPI adjustments to help save them from poverty. The CPI numbers were pushed down to keep the costs of benefits those retirees were entitled to receive artificially low. Another transfer of wealth / theft.
Now the rest of the population has seen their crappy but steady wages evaporate on a whim, and will no longer settle for less than an actual living wage. A rebalancing is going to have to take place, and somehow the wealth needs to be transferred back to the working class, or things will get very violent, very quickly. Once that kicks off, our near peers will funnel weapons into the US, and a civil war will make us the latest 3rd world country.
I don't understand why people think the economic situation in the US is bad enough to warrant a civil war. This "prediction" doesn't seem to be based in any type of logic at all – mostly fantasy.
>alt-righters love to larp about civil war, ton of them in this thread
Oh, yeah, they sure do. What happens when everyone eventually figures out politics is pro wrestling, and the same donor class runs the whole show? The fake left/right divide goes away, and the rich find themselves outnumbered, and their money won't buy them a way out.
It definitely will. The only civil war could be working-class cops and PMCs against people who are paid by the hour, who have to show up with an hour's notice, who have their urine tested, who have their complaints about discrimination and dangerous conditions ignored, and who are fired at will - and that war is always going on.
Wealthy people will (do) rely on people with guns to protect their physical vicinity, and the technology, organization, and propaganda provided by the people posting on this thread to multiply the effort of the people with guns.
edit: I bet you could have a civil war in the US that wouldn't affect the financial industry or the wealthy at all, even while the war was going on. Personal security would just become one of those things that people looking for jobs at FAANGs would expect as part of the package.
If we were still on the gold standard there would be a civil war. Right now the debt backed fiat system is flexible enough to avoid such a worst case scenario.
While full blown civil war is unlikely, there are good conditions for nasty stuff to happen. Political hypocrisy, dehumanization of the other tribe (both sides), coupled with worsening economic conditions and lots of young men that can't participate in society is rarely recipe for prosperity. Throw in some two years of lockdowns and a lot of tensions everywhere - chances for low key violence increasing across the board are not low.
Biden couldn't deliver one of his most important implicit promises - that will deescalate the culture war and return to normal. So far things has intensified.
Don't know if I agree that things have intensified since Biden came to office...in my anecdotal and possibly siloed experience it feels like things have calmed down significantly for one side and stayed about the same or decreased slightly for the other side. Maybe it's recency bias, and I'm comparing too much to 2020 when everything was extremely heated. But generally I feel like the left and right were both screaming in 2020 and now it's like 10% of the left and 90% of the right.
Savings accounts only ever paid like, 2% above inflation, right? I wouldn't advise keeping so much money in a savings account you thought you could live off the interest -- you'd be way above the FDIC insurance limit.
The transfer from the young to the old in the form of federal support of stock and real estate prices, and various subsidies to health care, is probably larger than the 2% interest and 1% CPI the old have lost.
For most retirees, inflation doesn't hit nearly as hard. No transportation to work every day, no kids to feed or clothe, home often paid off, generally lower expenses all around. Earning 5-7% off of a savings account, or maybe municipal bonds, was once a huge, reliable supplement to Social Security.
As far as the second part of your comment, you should get your head out of the clouds and look around at working-class America. Perhaps 20% of retirees own a significant amount of stock, or own a house worth enough to cash out of. The US median home price didn't even cross $250k until 2018. https://dqydj.com/historical-home-prices/
> As far as the second part of your comment, you should get your head out of the clouds and look around at working-class America. Perhaps 20% of retirees own a significant amount of stock, or own a house worth enough to cash out of. The US median home price didn't even cross $250k until 2018. https://dqydj.com/historical-home-prices/
Those "retirees" also do not have enough money to retire. To retire and live off the interest of a theoretical 5% interest savings account for 30 years requires you to already be wealthy. If you're a working-class baby boomer, you may have gotten that from your house when you sold it and moved into a bad neighborhood or an apartment. But that's just about the only way other than Social Security and old pensions that you're going to keep eating.
Savings accounts used to pay anywhere from 5 to 8 percent back when inflation was 1 to 2 percent. You didn't expect to live off the interest, but you did expect the drain rate to be far less than with effectively zero interest.
>Savings accounts used to pay anywhere from 5 to 8 percent back when inflation was 1 to 2 percent.
source? using the data from FRED https://i.imgur.com/O6EdHco.png, the periods where that was true (ie. interest rates being 4-6 percentage points above inflation is few and far between.
They haven’t paid that much for well over a decade. If you’ve failed to take a hint by now and are still keeping all your savings in a bank account, you have no one to blame but yourself.
The trouble is that there is no secret pool of wealth that can somehow give people the living standards they expect if only it were prised from the hands of the super-wealthy, and populist politicians and activists have been taking advantage of people's lack of understanding and desire to blame someone to lie about this. Everything that ordinary people need requires scarce real resources like land, raw materials, equipment, workers' time, etc. The super-wealthy do not use such a disproportionate amount of those that redistribution would help the rest of the populace. Which is why demagogues like to compare ordinary wages to their wealth instead - but although they're measured in the same dollars, one is measuring real stuff ordinary people buy and the other the shareholdings in companies times the last price shares traded and there's no way to transmute the latter into the former. Sure, many of those companies produce real things, but the general populace is already receiving those things, generally with very efficient pricing and use of limited resouces so there's no magical savings there either.
> Many older people saved large amounts of money in their bank accounts, and were expecting to live off the interest in their savings account once they retired. The interest they were due was effectively stolen when the central banks started giving away free money, it was a massive transfer of wealth.
The transfer was from people relying on interest/bonds to people relying on stock returns. Far more old people rely on stock returns than savings account interest. The transfer of wealth was actually from future taxpayers to stockholders.
The US is the arms dealer of the world. It is American weapons going into Mexico and other Latin American countries that are causing problems there.
The lawful/licensed gun owners in Canada have to put up with potential bans because of the too ready availability of guns in the US that are smuggled over the border and make headlines.
I assume GP was talking about serious crew served weapons like artillery, MANPADS, and the like. You are correct that the US is already set in terms of small arms, with its civilian population owning more guns than all the militaries of the world combined[0].
That being said I think GP's prediction of a civil war triggered by inflation is hysteria.
Boring explanation: The return on investment in developed nations is much lower than in developing nations. Companies invest abroad and avoid hiring domestically. This has resulted in a flood of cheap consumer goods from China and other Asian countries which enters developed countries. Americans don't have to work but they also don't get paid unless they own stocks in these multinational companies. Interest rates go down as inflation goes down. The country now has a surplus population of low skill labor that simply isn't needed anymore. As I said, if they don't work they also don't get paid which kills consumer demand and the lack of consumer demand then further reduces the need to invest. The winners of globalization end up with more money than they know what to do with so they just invest it at any yield. More investment with the same returns just means less yield. This means interest rates must go down as well.
Now here is a problem. We live in a physical world. Monopolies, extortion and violence exist and if you use them properly you can force yields to be roughly constant. You can achieve higher yields by screwing over other people. The most common examples are housing and medical bills. If national yields are 0% and your house gets 3% yields because it's location is a monopoly then you got those 3% at the expense of another person who is losing those 3%. Since the level of production and amount of money did not change, inequality must grow.
In that sense interest rates aren't the problem. The real problem is that there are investments whose yield does not follow the interest rate plus a risk premium according to the asset class. If housing yielded 0% then only those who actually want to live in it or rent it out (for a fair price) would buy it.
> A rebalancing is going to have to take place, and somehow the wealth needs to be transferred back to the working class
Inflation is the traditional way that wealth gets transferred to the working class (besides higher marginal tax rates - but that seems to have gone out of fashion). While inflation hurts everyone it hurts especially savers and especially old savers who have most of their wealth in assets with a fixed interest rate. Workers can renegotiate higher salaries so in the long run they are less affected than somebody with lots of savings during times of high inflation. Very low inflation for the past decade are a big part of the reason why the wealth gap has increased so much.
Transferred to the working class, but from where? From people with savings, but not people who own assets. So this is a redistribution between the lower castes, not from the higher to the lower caste.
I know the official inflation numbers for the past decade were small, but this highly depends on what you put in your basket. The rise of stocks, real estate, education and health over the past decade shows that inflation was there all the time. Therefore I do not see why low inflation would increase the wealth gap.
The wealth gap always increases without external disruptions (world wars, strong government) because the return on capital is higher than the growth of the economy as a whole.
> and were expecting to live off the interest in their savings account once they retired. The interest they were due was effectively stolen when the central banks started giving away free money, it was a massive transfer of wealth.
Well, it goes to show that the economy and financial system shouldn't be based on interest does it not? Something we've known for thousands of years now with the prohibition of interest/usury in Islam, Christianity, and Judaism.
It won’t happen. We’ve now seen companies literally shitting away their good will to avoid paying people more. They will not do it, period.
I think, at least for small businesses, if the owners don’t feel like they are overwhelmingly wealthy, they’ll just tank the business and move on, maybe go back to working for someone. And big businesses have cash reserves like mountains. They’ll play chicken until people beg them for jobs.
My read on this is that it seems like the equivalent of a subtweet about pay inequality.
If that is indeed the case then they should be arguing for something I wrote the SEC about a couple of years ago which is to have public companies report their salary costs broken down by executive pay and non-executive management pay and non-executive non-management pay. And to report the population of individuals in each cohort.
That 'pie' of payroll costs can be split up anyway a company chooses, but the weighting of it will allow investors to understand the future prospects of a company that under pays its rank and file relative to its executives and management.
> non-executive management pay and non-executive non-management pay.
I'm curious why you make a distinction between managers and non-managers - (though I get where you're coming from: I agree that at most companies the only way to climb upwards is into management), but in some industries there are opportunities for horizontal-promotion and other non-management promotions (for example, being an engineering technical advisor who reports directly to the CEO while having no reports of their own and having a total-comp far north of a normal IC eng)
Oh, then there's also companies like law-firms where lawyer partners in the firm aren't necessarily managers nor executives either, so I'm not sure how that would be fairly reported to represent the state of the income distribution.
I think most of us in the tech field overestimate the number of jobs where a high level IC can be comped equivalent to low level management. That’s really not the norm for most jobs, and often the pay gradients into management and senior management can be very steep.
I distinguish them because, in the US at least, pay for managers is significantly higher than it is for individual contributors and there are fewer of them. There is a further gap between executive (director and above) and non-executive management with respect to both bonuses and equity allocation.
Don't forget to count the contractors - although the purpose of contracting out all the really low-pay stuff is to obscure the question of whether they're even your employees at all.
The shifting of poor pay work to “temporary” contractors without benefits and equitable pay is a labor loophole that congress really needs to close this decade.
I can't believe important government economists didn't notice it. They can't be that insulated from real life.
This "skimpflation" is everywhere around us. It's one of the most frequent sources of complaints on this site. And it's not just about services, but also products. Everything is made with increasingly worse components, to worse quality standards. Value engineered to the point of barely being usable. And then some.
The other day we had a perfect example of this in the space of kitchen toys[0]. Few weeks earlier, the world learned that HDD manufacturers replace components of their products with cheaper/worse ones as months go on, without changing the product name. What I remember from this is learning that it's not them, it's everyone, everywhere, all the time. Replacing components without changing the SKU. Making worse quality versions of the same product, with the same name/model number, dedicated for Black Friday sales. Etc.
I guess I'm glad to know someone up there in US GOV is finally noticing.
EDIT:
I'm even more surprised about the whole discussion thread focusing around various indicators and anecdotes from the last two years. I think we should focus on how things were evolving in the years before COVID-19, because the pandemic kind of thrown the whole economy into a disarray, but the underlying causes of hidden forms of inflation were present for much longer than that.
Skimpflation is one problem with CPI -- falling under the umbrella of somewhat arbitrary hedonic adjustments. But the main problem is more fundamental.
CPI is calculated by surveying what a bunch of median Americans bought, and weights it by HOW MUCH OF IT they bought. For example, the weight of gasoline oscillated ~100% from its low from 2003-2007 because oil prices increased significantly during this time (median Americans drove less/bought more fuel efficient cars). And therein lies the problem. If you poll the median, and the median tends to spend all of their money (just reallocating it according to priorities), what you are really measuring is the median household budget. Which is why any chart of "real wages" is a flat line, which is obviously not accurate.
So CPI is a load of crap. Real inflation over the last 40 years has probably averaged closer to 3% (see the Big Mac index) than the <2% quoted by bureaucrats and politicians. To improve it, they could look at the 1000 highest volume items in the economy and measure changes in prices of those. Many of those are raw materials, so this would make hedonic adjustments a bit easier, too.
as someone with a bit of an economics and official statistics background as well as tech (albeit not in the US), one of my frustrations with visiting hacker news are these threads on non-tech topics.
for instance: CPI. how is it calculated?
I haven't downvoted this post, but let's use it as an example.
by my reading, the basic methodology is to obtain a basket of goods and consumer items and then track the price change in those items. yes, it's more complicated than that in the actual methodology in reality, there's likely some debatable things like hedonic adjustment and a real question over what the index should track, but the general idea seems sound.
this post seems to suggest that CPI is based on some kind of longitudinal household survey methodology weighted for how much individual households consume over time, and that statisticians and economists are simpletons fooled by basic household budget substitution effects as prices and consumption patterns shift.
CPI becomes "a load of crap". But the error seems to be in the original post's incorrect misunderstanding of how CPI is actually calculated. and the actual method is somewhat closer to his suggested base-item method.
> For example, if the price of tea rose dramatically during one year, consumers might switch their spending towards coffee, making it necessary to adjust the expenditure weights accordingly in the following year.
Or put another way, if fuel goes up astronomically and people buy less of it, they will adjust its weight downwards, limiting the effects of its price increase on the headline inflation.
It's not that statisticians and economists are fooled. The methodology works assuming that people have spare money and can choose to spend or not. But the reality is that things have got so expensive that most people are living paycheck to paycheck and spending everything they have, so their attempts to eradicate the bias of choice ends up just measuring how much money people have to spend (i.e. wage growth).
Let's run that scenario in a simplified manner of how CPIs are likely actually going to be calculated.
First, they have to determine the conceptual basket of goods to track. Ok, that's comparable to your 1000 "highest volume" items methodology (albeit yours is a bit simplified too, we'll ignore the problem that good or volume is complicated for everyone). Generally stats bodies do this by looking at what consumers actually spend things on. This seems emminently sensible to me, and no offense intended, superior to a top 1000 volume method. Fuel, presumably, gets included in both.
Then they need to assign a weight for every good to determine how much its mixture of quantity + price movements contribute to the CPI figure. I put it to you this is necessary. Every item shouldn't be equally weighted even in your methodology (the distribution of volume of relative goods purcahsed/consumed is guaranteed to not be uniform across all 1000 goods, and it makes no sense for no. 1 to be given an equal weight to no. 999). Stats bodies do this too. This is what is meant by weight adjustment in this context. And both you and stat agencies should be doing it.
At some point, your "top 1000" goods is going to change and you're going to have to figure out what is in a new basket at a new time. So too does the CPI basket of goods. You both need to do this. Note that your methodology does not actually fix the fuel-budget-substitution issue. Price movements in your method that invoke a strong enough substitution or consumption effect result in fuel dropping out of your top 1000 as well.
By keeping your basket constant for a given period of time and just tracking the good's prices, you track expenditure somewhat consistently for a given period. That's a good thing. There's no reference to changes in a consumer's budget. But...CPI calculating stats agencies do this too for a set basket of goods just like you do. They fix the basket and track it over time, adjusting, like yours, only for re-inclusion the basket of goods under consideration.
Lastly, comes the hedonic quality problem. Changes in quality of consumption/goods over time. Some substitutions seem just because of taste or culture (see for example, relative consumption of antimacassars over time, or certain culture's preference for certain foods or items). Others are obviously qualitative in nature (i.e. computer processing power), and most things are a complex mix of tech/economy/culture/price/quality. This is the part that captures and tries to control for your qualitative substitution problem (it's not without its controversies, but I argue that your method needs it as well because it suffers similar problems, and indeed all ones which try to standardise subjective consumption of a national economy into a single figure). Relevant to 'fuel' is its price, but also substitution to other new fuels that turn up (hydrogen, LPG, lithium-ion), but also technology efficiency gains that have changed the consumption to utility ratio. Again, stats agencies try to control for this too.
Aside from the definition of the basket of goods (a weakness and methodology shared by your "fix"), there is generally no explicit reference to consumer's budget or assumed spending patterns when tracking within a given basket. There is nothing inherently equivalent to "assumed spare money or choosing to spend or not". (I suppose I'm happy to be proven wrong on this for a given countries methodology). it's not just a simplified survey of median households or expenditure.
Now, you can (and many people justifiably do) take issue with ideas and quantification of hedonic quality problems: but it's a universal problem, your method doesn't fix it, and I think you're generally misconstruing how CPIs are calculated around the world. The problems you mention are already attempted to be tackled and controlled for in methodology, and the official methodology is already generally superior to your suggested replacement.
Edit: it's also not like stats/economics agencies are doing this WITHOUT an accesible measures of nominal wages (that is wages and resource flows without inflation taken into account) available to them.
edit 2: in the real world, further considerations like geography, seasonality, population, etc is additionally controlled and adjusted for. And many stat agencies, in my experience, offer additional breakdowns of other price series, such as geographical and categorical indexes, or various additional weightings and combinations, so if you take issue with headline CPI you can investigate other more appropriate measures for your specific use cases.
> Or put another way, if fuel goes up astronomically and people buy less of it, they will adjust its weight downwards, limiting the effects of its price increase on the headline inflation.
What problem do you see in that approach? That looks exactly like the expected behavior from the average consumer.
If your goal is to track the prices of goods and services actually consumed by the population, isn't it appropriate to lower the impact of goods and services that are consumed less by said population?
The goal is to track the relative price of goods consumed (the "Consumer Prices Index").
But if the way you're doing that basically ends up as "everyone is spending all of their wages", then your numerical value degrades to "how much wages do people have?".
> one of my frustrations with visiting hacker news are these threads on non-tech topics
Then you proceed to learn about CPI in detail for the first time, and use your incomplete understanding to refute mine.
I've been down the rabbit-hole on CPI and learned a lot (partially from someone else on HN, who also probably wasn't an economist). The Wikipedia page is pretty thorough for US CPI [0]. The high-level idea is pretty simple, and seems reasonable.
The problem is the survey itself [1]. The people contributing to the survey are one segment of Americans, not America as a whole. They are the middle class. Those are the 65% of people who actually fill out the forms and mail them back. And those forms are a lot of work, so accuracy is a whole other issue (Visa would probably be better equipped than the BLS to determine inflation). And if wealth inequality increases and inflation also increases (but money is moving into items that the middle class no longer can afford), that will not be reflected in the survey. The opposite is also true, but wealth inequality hasn't decreased much during the CPI's history. If wealth inequality remains constant, I would say CPI is not a "load of crap." Hyperbole, sure. But when so much is at stake, its nontrivial shortcomings do demand a bit of emphasis.
> Then you proceed to learn about CPI in detail for the first time, and use your incomplete understanding to refute mine.
> I've been down the rabbit-hole on CPI and learned a lot (...). The Wikipedia page is pretty thorough for US CPI [0].
Do you actually feel you're in any position to speak with authority on a subject, inclusive down to people with a background on economics, just because... You claim you read a Wikipedia article?
1. Avoid one of, if not the most common logical fallacy on HN: appeal to authority / credentialism.
2. Do not assume you know anyone's career, life history, or background on a mostly anonymous forum (neither mine nor the previous commenter's). Judge every comment by its merit.
I linked the Wikipedia page because it's all you really need to know for the purpose of the conversation. It reveals the flaw I am interested in discussing. If you have anything relevant to contribute to the conversation, I'm all ears.
The internet is an interesting social experiment. People have a few basic options when confronted with new information that conflicts with what they know (and therefore makes them do work -- rewiring the brain is evolutionarily expensive).
1. Fairly evaluate the idea and engage intellectually and curiously. There is simply too much information out there to do this for every new idea you see, but imo that's kind of the point of a site like this. You should just go to 2. if you are too tired/busy to give it an honest try.
2. Ignore/dismiss. Plain and simple.
3. Get angry and lash out. Make it personal. The most basic and primitive response. This is the one that doesn't belong on HN.
well, just for the record, I do, and I've also worked for the body that calculates our CPI. just before I left we were studying how to get what we call "administrative item data" from the retailer's themselves rather than relying on surveys, household interviews, internet scrapes or staff research. To be fair, CPI was never my specific methodology speciality, but I can talk your ear off about household incomes, relative welfare measures and theoretical probabilistic data linking and entity resolution :) (I've also had a finger in the pie of a lot of other measures even though I wouldn't call them my speciality, but I'll wager I've got more experience than 99.9% of hacker news in this regard).
honestly, as someone who's had to put together official stats, I'm almost always disappointed to hear the conspiracy theories and methodology misunderstandings in the general and tech community. back in my day when the government wanted to do actual conspiracy they just cut the funding for measuring/recording something. but instead we get "CPI is rigged", "do you know what the REAL unemployment rate is" government-manipulation ignorant memes.
Same thing they do with the current system. Normalize and replace, and don't expect much of a shock from relatively low volume items breaking in and out of the 900-1000 rank.
Hotels I have visited recently have all stopped cleaning rooms, due to "COVID-19 safety". But, when you request so at the reception, they will clean it (fresh towels is nice when you stay a week).
Don't get me wrong, I think this is actually smart, because most guest don't need to have their room cleaned every day. This is a massive cost saver for hotels. However, you'd expect prices to go down by this cost saving measure, but instead, they have gone up. Less service, higher prices.
The fact that their profit margins might increase if you decline cleaning service doesn’t change the fact that declining cleaning service is still a nice choice for the environment.
The problem with hedonistic inflation calculation: Should it reflect how things get more expensive or reflect the level of living? There are two forces, one which wants to represent costs and one which wants to represent value.
It at least makes comparing GDP between countries most difficult, because everyone calculates inflation differently - usually the US has the biggest gains in GDP because it calculates inflation lowest.
I think there is a real thing happening there. Luxury things are going up astronomically. It's just not for the middle class anymore. A bunch of the population just won. They got to upper middle class and it's no big deal to spend a few thousand here and there. $500 meal etc. There's a huge divide and there just won't be home ownership or all sorts of things. It just for the highest bidders now and they somehow have 10x more than you.
I've noticed a strange phenomenon going on with myself. Prices in the HORECA have gone up so much on avearge than shelling out the extra money to have to enjoy the high end options. TO give a contrege example: a beer at my corner bar goes for €4.5 now. The Sofitel rooftop bar in town will have them at €5.
"Why Food and Energy Prices Are Excluded - Food and energy prices are exempt from this calculation because their prices can be too volatile or fluctuate wildly. Food and energy are necessary staples, meaning demand for them doesn't change much even as prices rise"
Here in Canada, canned bean can went from 67c to $1 and the salt less ones went from 87c to $1.27 within a month. Cat food can went from $1.69 to $2.29.
I am not rich and for now I can still afford food. But this is definitely insane and the poor are suffering hard.
That's how inflation behaved in many historical situations. I'm bookmarking this comment, at least I'll have the pleasure of "I told you so" if the authorities fail to bring inflation under control.
Having lived through hyperinflation, two of the early signs are jolts in prices of common goods and shortages. I really really wish I am not going to live through another such period late in life, but who am I kidding?
There will be no "collapse" the way some of these people think of it. It's not going to be like the movie "Dawn of the Dead" or whatever where one day suddenly shit hits the fan and prices skyrocket and everyone begins to riot and the SS comes marching down the street to kill everyone. There will be no "happening". It's far more insidious than that. Read the poem "The Hollow Men" by TS ELiot and you'll understand.
You'll just notice that every day simple things will become a little more expensive. Everyone's homes and apartments will start to get smaller. your work hours will get longer, but your pay will decrease. You'll see family and friends less, and find that in time you care less about them. Every day you'll find yourself lowering your standards for everything: work, food, relationships, etc. Job security will no longer exist as a concept. You'll notice houses and apartments shrinking. People will start hanging on clothing longer and longer. Less people will get married, even less will have children. People will engross themselves in technological distractions and fantasy while never truly experiencing the real world.
Whatever dream people used to have about what their lives were going to be will become for them a distant memory. The only thing left for them will be the reality of their debt and their poverty. And every minute of every day they will be told: "You are stupid, ugly and weak, but together we are free, prosperous and safe."
That is the collapse. The reduction of the American man into a feudal serf, incapable of feeling love or hate, incapable of seeing the pitiful nature of his situation for what it is or recognizing his own self worth.
Is this seriously what people think? That sounds totally nonsensical. Do people just completely forget how far we’ve come to get today? Just totally romanticise anything in the past? Get real…
> The quality of service seems to be deteriorating everywhere.
Given that it's generally accepted that the U.S. economy is no longer based on the production of goods, and is mostly a service economy now, this doesn't seem to bode well. I wonder if this is like a normal vicious cycle which will eventually be broken, or if this is a permanent change?
Based on personal experience living in Europe, a society can function quite well even with a pathetic level of customer service. This might be the new normal.
> Based on personal experience living in Europe, a society can function quite well even with a pathetic level of customer service
I don't know. In my experience customer service in Europe is better than it seems. In the US my customer service agent will tell me very smilingly that unfortunately there is nothing they can do for me right now but is there anything else they can help me with?
In Germany where I lived before coming to the US, whomever answers the phone will take the time to point out why it is really my fault we got into this mess in the first place but will then grudgingly tell me that by exception they can fix it just in this one instance.
It probably depends upon the company. As much as I dislike Amazon, their customer service is outstanding. An anker headphone I bought also had excellent customer service.
I am surprised when people say Amazon has a good customer support. Either I had bad luck at least 10 times or everything else must be even worse.
Like a 2$ refund I never got because they sided with the seller even thought they did not even have postal tracking as promised.
Or the bill for Amazon warehousing I get yearly because I am stuck in their registration loop as they don't like my CC. If I asked them to stop billing a unfinished account they just answer with canned responses. Going on for several years now.
Or the time they suddenly merged my accounts and erased my ~5$ left in credits. Because apparently I should use the same account for private and business
Zelle blocked my phone number (verizon, not some burner number) as ineligible out of no where after using it them for a few months. They said they can't tell me why and there's nothing I can do about it. I almost threw my phone against the wall.
> Based on personal experience living in Europe, a society can function quite well even with a pathetic level of customer service. This might be the new normal.
How do you mean? I've always much preferred European service to American service. But then, I also loathe interacting with waiters as if we're old friends or something and get unbelievably frustrated when someone tries to bag my groceries.
Try getting anything done with a French or German bank. American customer service is several levels better than my experience with European institutions.
Oh man, I remember doing my weekly grocery shopping at Caprabo, and having the miserable cashiers absolutely fling the bottles, bags, boxes, cans, etc. down the table after they rung them up, and you would have to try to bag as quickly as possible because she wouldn't wait once the next person was coming through. Gah!
Anyways, I hate bagging my own groceries even in the U.S., so there's an example for you. Not that big of a deal, European society in general works quite well, regardless of how horrible and mean their cashiers are.
We have been using self checkout for a few years here in Australia, and the thought of having to even go through a normal checkout with a cashier now kind of yuck.
It used to be that way in USA. But in the course of businesses squeezing more out of less the cashier now does double duty. He just has to work harder.
I don't know of a reasonably priced store in America that provides a second human helper and in a few years you won't get one. Rfid is going to result in checking out mostly consist of confirming that you in fact want to pay for the items you've collected. Virtually everything you want a cashier to do is a papering over bad or broken process or user stupidity.
For example item's with marred tags or which don't have one by design and inaccurate pricing are fixable problems. Customers not being able to read on the other hand is not the stores problem.
That fails to account for drastically reduced space and operating costs of self-checkout machines. In my experience one cash register is generally replaced by 3-5 self checkout machines. Even if the cashier is twice as good at scanning and bagging the self-checkout will have much shorter lines and as a result will be much faster.
Couldn't the second employee cashier and save even more time?
Also for example WinCo which doesn't bag has 2 endpoints per line for it's treadmill of food they check out one person shoving order number 1 to endpoint one then use number two. One really slow person can't slow matters down.
I drove out of my way yesterday to pick up food from a popular chain restaurant usually famous for their super quick takeout. I was turned away, cash in hand, told they are only taking online orders.
I’m not even mad, while I was undeniably irritated in the moment, I’m now moreso just curious how the math works out.
Short staffing means a person who would have to play cashier can be making food. How many customers do they send away in a day given that was their usual schtick? Does it actually work out better for their business?
Don’t conflate the service sector with customer service. For example most white collar jobs that have nothing to do with normal “customer service notions” are part of the service sector.
> It's when, instead of simply raising prices, companies skimp on the goods and services they provide.
This is old news. For food and beverages it’s a well known phenomenon: The average package sizes have been decreasing over time for some standard products to keep the nominal price constant. In Europe, for example, Coca Cola started to sell 250ml (8.5oz) cans a couple of years ago instead of the regular 330ml (11.2oz) ones.
That's shrinking. Skimping would be Coca Cola diluting their product with water, or using some kind of cheaper to produce cans/bottles that are more likely to burst open.
I would argue that changing the product itself is shrinkflation. This new skimpflation would be say removing the perforated handles on Coke cardboard cases to save money on stamping machines.
Yes, it is generally considered shrinkflation[1] and the author does mention that. It can be overcome by measuring unit prices for items. However, in cases like the lack of services and delays - it doesn't really capture it.
I've often noticed extremely long wait times for customer service calls due to reduced staffing. These are numbers that are missed in the official CPI calculations.
I would much rather have an old fashioned dumb tv than a spying, adverising injecting, sluggish smart tv with crappy apps that never get updated. So the hedonic adjustment should definitely be negative.
IMO the adjustment should not be proportional to f(diagonal length), but f(diagonal length, average living room diagonal length), because the optimal viewing experience comes from picking a correct TV size for the distance between you and the screen.
I'm also seconding the proposal for negative hedonic adjustment on TVs (and arguably everything) that's a function of amount of advertising shown through them.
As an anecdote, in 2013 I "measured" inflation as it affected me. By this I mean the things I buy like petrol, food, utilities, insurance etc. I looked at bank statements from 2011 and 2012 and compared them to the 2013 bank statements.
It wasn't 100% accurate as a couple of things changed but it was definitely close enough to be applicable.
In 2013 I was paying out 13% more for roughly the same stuff yet the official government figure was was less than 3% per annum.
So my own inflation in that two year period was twice what the government said it should be.
In short, it doesn't surprise me that they're talking shit about inflation! High inflation won't win you an election.
I haven't checked 2021 vs 2019/2020 yet but I will in January 2022... although, I may not want to :(
Land (especially desirable land near good jobs) is in far more limited supply than people willing to immigrate to the US. Zoning and other regulations not withstanding.
The land around most population centers in the US is used incredibly wastefully. If you compare the density of a modern Asian city to a US city the comparison is pretty woeful (probably contributes to the "going back in time" feeling when visiting the US also).
None of those dense Asian cities are affordable. Yes, Shanghai is dense, but for sale prices are as dear as in SF, maybe even dearer if we compare comparable housing rather than just averages.
Because as a human I feel most happy when living in a high rise 1 bed apartment overlooking congested streets and inescapable city noise. What about maximising for human wellbeing?
I'm actually surprised by how many people here seem to be in favour of packing people into ever denser cities simply for the economy benefits of doing it. I suppose it's just the demographic of people who browse HN.
For a lot of people, that 1BR apartment is heaven. It's easy to get to work, easy to see friends, easy to go to bars and restaurants. Cost-wise, it's a great deal too. Even with rents being "high" (maybe $3000/month all-in) that renter never needs to replace a roof, a boiler, repair hardwood flooring, pay the electrician or plumber, renovate after a flood, or any other huge costs that can balloon into the $10k+ range.
Some people see housing as more a means-to-an-end and like the city life. Other people hate the city and want green space and bonus rooms.
The problem is that America is getting more urban (just look at the 2020 census) but our housing stock hasn't build the townhomes and condos needed to support it.
People are not really in favor of it, which is why virtually all cities get less dense over time. People spread out, as they do, the cities get flatter and housing units get bigger.
When you look at pictures of old housing units, it's striking how small they are in comparison to newer construction. As people become wealthier, they demand larger living spaces, which means they want to spread out. Now you can offset some of that spreading out by going vertical, but that's extremely costly (space needs to be set aside for stairs, elevators, you need stronger walls, more complex construction, HVAC, etc).
Although people like to focus on things like skyscrapers, but those are really rare even in places like NYC. Going vertical is mostly for luxury construction, at least in land rich places (not e.g. Hong Kong).
In most places, building lower to the ground is more cost effective so as wealth increases and transportation technology improves, cities become less dense.
There is a study about the secular decline in urban density, showing that cities get about 2% less dense every year, and this trend goes back to at least 1910. So no, it's not just zoning, but in general people prefer lower density.
The study is by the Lincoln Institute, my favorite think tank dealing with land use issues:
"Using satellite imagery, census data and historical maps, we report on density variation among cities the world over. We find significant differences in the average population density in the built-up areas of a global sample of 120 cities: In 2000, average density was 28±5 persons per hectare in cities in land-rich developed countries, 70±8 in cities in other developed countries, and 135±11 in cities in developing countries. We also find that built-up area densities in this sample declined significantly, at an average annual rate of 2.0±0.4 percent, between 1990 and 2000. We report on the five-fold decline in average tract density in 20 U.S. cities between 1910 and 2000, at an average long-term rate of 1.9 percent per annum,"
I live in Calgary and all the complaints about housing sounded ridiculous to me. Then I read about PEI's housing shortage and suddenly realized that I was probably in my own bubble.
Calgary, even with recent economic struggles, has been a sort of magical Christmas land with relatively high wages, low cost of living and urban sprawl development to meet demand. I don't think there are many other places in Canada that tick all those boxes.
Central bank try keep inflation at 2% by lowering interest that will in turn increase wage inflation. Systematic fault central banks has made is a) Wage inflation prize of goods is globalized in a global economy and cannot be controlled by local central banks. b) robotics, automation and startups are funded partly by loans and thus its deflationary. Ie loaning/investing in automation by loans acts deflationary not inflationary.
Mix of cause and effect. Low inflation by globalization not wage inflation by low interest rate.
That is why we are seeing higher inflation on locally produced goods for example hair dresser, lunch. But not so much inflation on globalized goods like Tv, electronics.
I very much like your analysis. We need to look into more details and the very different nature of things today. We are still viewing inflation as if there is one economy. But there are many different (global) markets resulting in very cheap things (e.g. from abroad - TVs) and expensive things (e.g. locally - Food). We need to add this to our view and also anticipate where these modern factors lead to: Wage stagnation, still high increase in prices for local goods + development of the "cheap goods producing countries". Last factor will also increase the prices of those goods, which could set off this time bomb (and cause the civil war mentioned).
Imbalanced trade is one of the biggest drivers of wage stagnation. Export surplus countries must keep their wages artificially low which forces importing countries to compete by cutting their wages.
I.e. low wages in Germany drag the entire EU's wage level down.
>b) robotics, automation and startups are funded partly by loans and thus its deflationary. Ie loaning/investing in automation by loans acts deflationary not inflationary.
I actually agree but the argument is kind of funny. It would imply that we are far away from any physical constraints and that issuing more liquid credit (money) just accelerates technological progress which makes the original problem worse. I.e. unfair distribution of earning opportunities which leave some people with all the money and others with no money.
I use to spend $30/day on car rentals and get upgrades for free. Now I spend $50/day on car rentals and get some old shit box with tons of miles that smells like stale cigarettes.
Not much. I think it’s greed. I saw regular new car deliveries at my local Hertz over the last 6 months. They’ve not lacked inventory from what I can see for a while now
A big factor for sure. I rented a car in Sept 2020 and was surprised to see no cars available when nobody was traveling. Usually keys are waiting for me (elite member) but had to wait line (!!!) to get a clean car _at the airport_. However, I think this shows there is a lot of room for both price movement and QoS movements down, and consumers just shrugging it off.
The rental car industry is a very special case here of an industry completely decimated by the pandemic. they had no choice but to liquidate their assets. and then once travel resumed, they had no cars and it turns out it's much, much easier to quickly liquidate your assets than to get new ones.
So I took a weekend off to visit another city just for the heck of it, to figure out how inflation and COVID have impacted the travel industry. I am surprised.
I flew to Mumbai on a low cost airline and stayed at a 5 star property. The rates and service levels are at per-COVID levels. The flight was packed, but expensive compared to pre-COVID levels. The hotel a totally different story. The crowds are marginally thinner. On a Monday morning what would otherwise be a bustling morning at one of the flagship hotels in SoBo, there are a handful of guests. Yet the service levels are top notch, food is fabulous.
So I guess companies that are hard pressed to show profits at any expense are skimping on stuff to show profits but there are others who are not sacrificing service and quality levels for profits. Though the latter are far and few.
My reading is that, sadly the skimping will continue for a long long time. Once companies discover a new path to profitability, it’s very hard for them to give up on that unless there are several market and demand forces which act against the skimping. For instance, volume. Once volume picks up, there will be no option to but get rid of the skimping in order to save time. But volume picking up is a huge if. I doubt the travel and leisure volumes will ever reach pre-pandemic levels.
Combine skimplation with wealth inequality and lowered product quality and you will begin to see how far gone we are.
Imagine, like global warming, if certain people knew that massive inflation was occurring, but that a correction would slow down their profits. Then imagine, like global warming, those people spent all of their time disguising this reality rather than trying to fix it. We're pretty far into the grift at this point.
I'm starting to suspect that any single measure of inflation is pretty meaningless. I'll grant that the CPI measures some kind of inflation, and I'll grant that the Fed does keep CPI in check. I don't think CPI captures the the typical inflation that I see in housing, education, and other costs over the last 10 years. I don't think CPI is capturing the cost increases in food and other goods over the last 2 years.
I think we need some additional measures of CPI which capture "opportunity cost inflation", "basic goods inflation", and "non-productive asset inflation". It's easy to claim substitution for city center housing by living further away from the city, or moving to a tier-2/tier-3 city - but this also comes with the opportunity cost of jobs. Similar claims can be made for deferring education/medical costs or choosing cheaper alternatives.
Opportunity costs add up over prolonged periods of time. A generation who had to substitute out high quality opportunities due to inflation will eventually be poorer for it.
The article reminds me of one of my recent experiences flying.
The airline (SWA) cancelled our connection. As in, they still flew us half-way, but allowed the connection to leave, stranding everyone on the connection. We were only marginally delayed, and even the most short-sighted analysis of "which of these is costlier" would have told you that cancelling the connection was dumb. But airlines treat weather as 100% unpredictable events, and so…
They offered to give us a voucher for a hotel, since they were stranding us overnight. We had to call a number for the voucher to make the hotel reservation. They guy on the line: "I'm sorry, I need to know where you are. I don't have a 'Saint Louis Airport' in my system." I'm, of course, sitting in Saint Louis at the time. I gave him the IATA code, and "Ah, Lambert International!" so that was annoying.
But then the "discount". We arrived at the hotel, and they initially didn't want to give us the discount, despite there also somehow being a reservation in their system? "We don't offer that discount." Well, okay, that's nice, and not my problem. After negotiating the discount back into existence, between me and the hotel clerk also then realized that my AAA membership was a better discount.
I just want to give money, and receive flight. Weather is fine, but lately it hasn't been weather cancelling my flights, but mismanagement & "oh, we don't have a crew for your flight" or "uh, we don't have a plane". These really ought to be full refunds + you still deliver carriage, so that these failures get rectified.
There are increasingly more and more examples I find like this, where I as a consumer cannot acquire the good or service I want at any price: I'm settling for a high price and a very substandard product or service.
I agree that 'hedonic value' should be tracked, but it has no place in inflation calculations, IMHO.
For example, let's say I enjoy a fast-food burger, a BK whopper. It costs, for sake of argument $4. Now suppose, BK add some extra pickles, sauce and a bigger burger across their range, but up the price of a whopper to $4.50.
But, with a hedonic adjustment, the burger still only costs $4, since the $4.50 price rise is 'fake news' as it includes extra burger, etc.
Because this adjustment is included in the inflation figures, my next wage review will reflect the fact that I can still get 'just as much burger' for the same price as last year.
But the reality of course is that I have to pay more for the same 'level' of burger, even though it got better.
IMHO, Inflation figures should reflect the cost of inhabiting various social levels, and average those.
The overall material quality of life of a society should be an entirely separate metric, probably a replacement for GDP which is quite flawed.
I feel like the vast majority of products you're buying are either bulk purchases or have versions at many many price points, making them immune to this effect.
I wonder how much of this labor is a choice between online labor versus choosing not to work retail where the profit is a lot lower, meaning your take-home is equal to your costs.
Let's assume that you can make a reasonable living in a different part of town instead of commuting to a service sector job. Add on top of that, you get to control your hours and there also seems to be more and more foot traffic in that part of town. As you start moving to that part of town, you realize that it's so much closer to your work that you save money on transportation and you have free time to pursue investing or other ways to better yourself. I don't think we would ever have issues with labor moving to better parts of town, right?
The only issue is that this better part of town is the internet. I wonder if the larger long-standing effects of COVID were an experiment on the general population that they could make money outside of what they've been told.
Everybody is (rightfully) addressing the article and the current status, which seems to be: inflation has risen.
Now, let’s discuss possible scenarios. Do you think they’d do a shock measure to reduce monetary offer and reduce inflation, highly raising interest rates?
Or it’d be more gradual and we have to get used to live with inflation for the next ~5 years?
I would recommend this small article by economist John Cochrane <a href="https://johnhcochrane.blogspot.com/2021/10/supply.html">http.... The corporate media in general is very quick on this one calling it a transitory inflation. I am not sure that's case. We may be in for a bad stretch. Supply-side inflation can be very damaging and hard to fix, especially when the government is pushing a stimulus bill that, not only does not address the issue, it will potentially make it worse by throwing even more sand in the gears of the supply chain. People should plan accordingly.
CPI includes many loss leaders, e.g. milk and bananas. So is it really fair to benchmark inflation off of the retail prices of those items if the retailer is losing increasingly more money on them while making up for it on other inflated/shrinkflated goods?
why wouldn't it be appropriate? whatever the profit/loss on individual retailer's books, actual goods are being transferred for actual monetary prices.
if the system was unsustainable, CPI would adjust just as the prices and products adjusted in the system. which is presumably almost exactly what you'd want out of a measure like CPI.
CPI's job is not to determine whether a situation is profitable or sustainable.
[This video][0] explains it. Basically they have all sorts of math tricks to make you believe that inflation is OK. I think the problem is not the FED. The problem is the people who let the FED get away with this __fraud__.
Another anecdote for the pile. Our weekly shops have gone from £130 to £190 over the past couple of months with little appreciable difference in content.
All our friends have noticed similar. Some have had to change their shopping habits to make ends meet.
I don't understand how RPI and CPI inflation markers aren't reflecting this but this a trend we're not going to be able to afford much longer.
Reporting inflation is complex and the natural bias is to report it too low, so that more money can be "printed".
The idea of the "Big Mac index" suggests the need for alternative metrics. Consumer organizations should get to work on this and have their index published in the media along with the official numbers.
If you look at Shadow-stats, they compute the M3 money supply as about 28% more than last year[1], and that trend doesn't seem to be abating. This is likely going to end up somewhere between the Nixon shock, and World Depression I.
One thing very likely to happen is that the US Dollar stops being the world's reserve currency, and we stop getting real goods in return for promises backed by the same folks who play chicken with the debt ceiling every year or so.
I suspect we'll have a rough decade, and if we decide to start making our own goods, things will improve, if not, we're going to end up like England, talking about our former glory.
There are so many ways, but the obvious one is getting a job in a different industry. Warehouses and logistics exploded last year when the tourism and hospitality industries essentially stopped.
Don’t forget how much fraud was introduced into the unemployment data last year.
People keep interpreting this as "they're just not working!" whereas the actual answer is much closer to "people have utterly lost their tolerance for terrible bosses, and 'worker shortage' means there's plenty of ability to shop around".
The upgraded unemployment payments might have acted as a sort of UBI that gave those looking to change careers or get a better position time to plan, learn, and complete the long and arduous process. Having a buffer lets people focus on what's important for them and this pandemic gave nearly everyone more time and, for some, the means to safely take the next step.
it's expensive to be jobless. switching jobs with a cushion of safety in the form of stimulus checks and additional motivation of not being paid in the current job anyway is much easier in the sense that there's much less opportunity cost.
> Cole was formerly a senior economist at the Joint Economic Committee of the U.S. Congress, where he used to advise Sen. Mike Lee, R-Utah, and write official economic reports. These days he's a writer at Full Stack Economics. For most of his economics career, he says, he had believed that official government statistics actually made inflation seem worse than it really was. He had thought they didn't fully capture improvements in the quality of products and services when quantifying changes in prices.
> [...]
> Mismeasuring inflation has important implications. For example, it's common to hear people argue that the real, or inflation-adjusted, wage of the typical American worker has stagnated in recent decades. But if the government has been overstating inflation in its statistics, this means American workers' paychecks actually go further and living standards have gotten better than official statistics say.
So this guy's been spending years saying inflation was much lower than the stats show for political reasons and now he's saying the opposite at a time when that would happen to be politically opportune. Hm.
How could there possibly not be massive inflation given the amount of money that we've printed in the last two years? And the current administration is using these completely misleading inflation numbers to justify even more spending on ready bloated and unsustainable social programs [0]- all while failing to secure the border and expanding the pool of spending recipients.
This is effectively a tax on the native middle class - and apparently a big one. I did not consent to any of this; did you?
I think some inflation will do us good. Things get pricier so people buy less, thus require the things they do buy to last longer, and we move away from the disposable everything culture and all its byproducts.
First, you can't reason from a price change. Things might get more expensive because there's more demand (ie people buying more), or because supply is disrupted.
Second, inflation is a general rise in the price level. That includes a rise in wages. If you 'want' people to buy less stuff, you need to lower their real incomes. That can happen in a period of general inflation, general deflation, or even stable prices.
When the price of fuel increases, the cost to send a worker from point A to point B increases. However the worker salaries don't change all that much, or at-least not uniformly.
Durable goods are still available to purchase. Miele makes vacuums, Samsung makes ranges, and so on. Most households do not purchase them because they value their money higher than durability of their goods -- it's a good trade-off for them, because the $1000 they don't spend ensuring their washing machine lasts 50 years instead of 15 can then be used for transit or food; or the $1000 simply didn't exist in the first place. We have a glut of disposable, nondurable goods that were traditionally durable because the durable goods are expensive, and what you can get working 40 hrs/week at a warehouse job has essentially plummeted. The replacement goods are a way of absorbing this loss of income by substituting low quality instead of fewer things -- a further loss of effective income would only reduce the quality floor lower.
> The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
> Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
> But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
> This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.
I have a set of $500 sheets. They don’t stain (coffee, hair color, childrens puke, etc) and they’re soft as silk. They are an amazing set that we’ve had over 10 years now and slept in them every night for most of those years without a single thread fraying. I totally got them on a lark, when I was a briefly rich.
Every time I read this I think that an intrepid boot salesman would issue credit and sell the good boots for say 7 yearly payments of $10 and make a killing.
Everyone seems to love quoting that, but it's just a quip from a fantasy series written by a professional writer (i.e. no experience in economics/shoemaking/business/etc).
I hope that your intuition is correct, but I think the opposite is equally as plausible: prices are "sticky" so producers cut costs to compensate, exacerbating high disposal frequency.
The past few years, mobile devices and computers have been built better as device manufacturers compete on durable screens, water resistance, and more reliable hardware. A 3 year old phone isn’t trash like they used to be. And a good 3 year laptop has a few years left before needing to be replaced.
Cars too - car quality has accelerated since the late 90s and early 2000s, and because of that, a few less people are suffering the car price hikes.
"But Cole believed that the government, while accounting for quality improvements, still failed to capture how
much better products and services were
getting. He didn't believe it was some sort of Illuminati conspiracy of Satan-worshipping pedophiles juicing the statistics."
My rent has gone up 30%. What used to cost me 100 something in groceries now regularly goes into the 200s.
I'm nothing if not an observationalist, but this CPI is horse dung.
For someone like my family, I wouldn't believe any number less than 20%.
The sad thing is, I've never talked to a single friend or family member that said otherwise.
So what is the government reporting?