Best Santelli Rant in a while..

[Ricter]

Tracking Inflation: Consumer Price Index vs. MIT Billion Prices Project

"After calculating the new savings bond rate, I noticed that from March 2012 to March 2013 the inflation rate per the Consumer Price Index was only 1.5% over the past year. Whenever you see the government announce a relatively low inflation numbers, there will always be people shouting “the government manipulates the inflation data!”. I looked into this previously with my post Does The Government Underestimate Inflation Through The CPI? Short answer: Yes they do, but maybe not in the way you think.

"Usually, this is followed by the anecdotal argument “Does gas ever go down? Does your rent ever go down?”. It certainly feels like prices are rising quicker than that. My water bill just got hiked another 10%. The thing is, we always notice the increases, but tend not to notice when prices drop. When something is cheaper, we just chalk it up to being great bargain hunters. Truth is, gas prices did go down for a while.

"Another way to keep an eye on inflation is with MIT’s Billion Prices Project (previous post) which tracks prices in real-time by grabbing them from websites. By checking on 50,000+ different prices daily covering everything from prescription drugs to clothing to real estate, this alternative inflation measurement has the potential to keep governments “honest” with their numbers.

Index Values: CPI vs. BPP:

<img src="http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2013/04/1304_bpp1.gif">

Annual Inflation (% change, last 365 days)

<img src="http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2013/04/1304_bpp2.gif">

"Charts taken on 4/17/2013. Over the past five years, the two indexes have actually tracked relatively closely. Just recently, the two are diverging a bit; BPP is showing a little over 2% inflation as opposed to 1.5% from CPI. It appears that the daily BPP updates run a little ahead of the monthly CPI updates, so perhaps an uptick in CPI is coming."

 

[Ricter]

Quote from Tsing Tao:

Thanks, pisspoor! Keep working.

 

[pspr]

Quote from Ricter:

Thanks, pisspoor! Keep working.

I may need to take a break, Rectum. You are posting too much garbage such that even I am having trouble finding time to correct it all. Don't you need to go plow the back 40 or something?

 

[Martinghoul]

Quote from Tsing Tao:
Very few what? Princeton economists? Very few Keynesian educators or bloggers?

Everyone who goes into the grocery store believes inflation is high. They see things that the Fed doesn't consider. First, the Fed doesn't even look at CPI, it looks at core, right? No food and energy. A long time ago when these prices weren't volatile, that was fine but as an increasing amount of people's disposable income is made up of food and energy, it's very important now. The Fed doesn't even look at food in their dual mandate, much less consider things like "is a gallon of milk going through the roof?" or "why is my 20oz can of peaches now 16oz for the same price?" (downsizing is not computed in food CPI at all). Then of course there is hedonics and the many, many revisions of how CPI is calculated over the last 30 years to benefit the government.

My views are very much out there. But media and main street (read: Keynesian) economists dismiss it as irrelevant or incorrect, yet can never argue against it. Much like you do.

I don't want to get involved in this discussion, but I do have to correct you. Nobody dismisses your views and they are much debated (including the many discussions I have had with people, incl on this forum).

There is just no evidence whatsoever that the estimates of inflation that put it somewhere arnd 8-10% (like ShadowStats) are credible. There's quite a few independent inflation gauges (already mentioned BPP, Orcam Housing Adjusted PI, ECRI etc) that suggest that CPI isn't too inaccurate of a measure.

If you want a balanced summary (includes ShadowStats), here's a nice one:
http://www.advisorperspectives.com/dshort/updates/Inflation-Since-1872.php

 

[Tsing Tao]

Quote from Ricter:

Tracking Inflation: Consumer Price Index vs. MIT Billion Prices Project

"After calculating the new savings bond rate, I noticed that from March 2012 to March 2013 the inflation rate per the Consumer Price Index was only 1.5% over the past year. Whenever you see the government announce a relatively low inflation numbers, there will always be people shouting “the government manipulates the inflation data!”. I looked into this previously with my post Does The Government Underestimate Inflation Through The CPI? Short answer: Yes they do, but maybe not in the way you think.

"Usually, this is followed by the anecdotal argument “Does gas ever go down? Does your rent ever go down?”. It certainly feels like prices are rising quicker than that. My water bill just got hiked another 10%. The thing is, we always notice the increases, but tend not to notice when prices drop. When something is cheaper, we just chalk it up to being great bargain hunters. Truth is, gas prices did go down for a while.

"Another way to keep an eye on inflation is with MIT’s Billion Prices Project (previous post) which tracks prices in real-time by grabbing them from websites. By checking on 50,000+ different prices daily covering everything from prescription drugs to clothing to real estate, this alternative inflation measurement has the potential to keep governments “honest” with their numbers.

Index Values: CPI vs. BPP:

<img src="http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2013/04/1304_bpp1.gif">

Annual Inflation (% change, last 365 days)

<img src="http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2013/04/1304_bpp2.gif">

"Charts taken on 4/17/2013. Over the past five years, the two indexes have actually tracked relatively closely. Just recently, the two are diverging a bit; BPP is showing a little over 2% inflation as opposed to 1.5% from CPI. It appears that the daily BPP updates run a little ahead of the monthly CPI updates, so perhaps an uptick in CPI is coming."

I've read this article before. Can't argue with any of it. But the problem with the BPP is that we don't have data going back very far.

A 2% increase off of a price from last year may not seem all that much, but until you consider that last year's price is already 50-60% of the price in 2004. A gallon of milk may go to $3.49 from $3.42 the prior year (a 2% increase), but that's still a 7 cent increase, and milk was 2.64 back in 2004 (30% increase since).

Add all those 7 cent increases up across the board, mix them with some much higher ones (as has occurred in the past 5 years) and that's real inflation, and real money.

Quote all the charts/articles you want, you're just supporting my statements. At least so far.

 

[Ricter]

Quote from Tsing Tao:

I've read this article before. Can't argue with any of it. But the problem with the BPP is that we don't have data going back very far.

A 2% increase off of a price from last year may not seem all that much, but until you consider that last year's price is already 50-60% of the price in 2004. A gallon of milk may go to $3.49 from $3.42 the prior year (a 2% increase), but that's still a 7 cent increase, and milk was 2.64 back in 2004 (30% increase since).

Add all those 7 cent increases up across the board, mix them with some much higher ones (as has occurred in the past 5 years) and that's real inflation, and real money.

Quote all the charts/articles you want, you're just supporting my statements. At least so far.

Those charts are supporting that there is inflation, but not supporting your statement that inflation is high. Furthermore, the income and PPP charts indicate that, at worst, wages are keeping up with inflation, not falling relative to inflation.

 

[Ricter]

Employers to raise worker pay by 2.9% next year
By Les Christie @CNNMoney July 16, 2013: 9:24 AM ET

<img src="http://i2.cdn.turner.com/money/dam/assets/130715140242-pay-raises-071513-620xa.png">

"NEW YORK (CNNMoney)
"Despite a strengthening economy, pay raises next year will only be slightly more generous than they have been over the past few years.

"Employers anticipate increasing worker salaries by an average of 2.9% in 2014, just marginally better than the 2.8% boost they gave this year, according to an annual survey of 1,500 mid-size and large U.S. employers by consulting firm Mercer.

"While a vast improvement from 2009, when raises averaged 2.1%, the expected pay increases are still a far cry from mid-2000 levels when they averaged around 3.5%, according to Catherine Hartmann, a principal in Mercer's Rewards consulting business.

"That's partly due to the still high unemployment rate. In June, the unemployment rate was 7.6%, meaning employers in many industries still have the upper hand when it comes to hiring and can easily recruit and retain employees without increasing salary offers.

Related: Cities with the biggest pay hikes

"Also weighing on wages are increased costs tied to retirement and health care benefits, which leave less available money for salary increases.

"This is the new normal," said Hartmann. "This is the way things have settled in."

"To remain competitive, however, employers will eventually have to increase pay, especially among top performers.

"Employers recognize that their greatest challenge is to retain their top performers to avoid post-recessionary flight," said Jeanie Adkins, who is a partner in Mercer's Rewards practice. "This means they have to reward them." More >>

 

[Tsing Tao]

Quote from Ricter:

Those charts are supporting that there is inflation, but not supporting your statement that inflation is high. Furthermore, the income and PPP charts indicate that, at worst, wages are keeping up with inflation, not falling relative to inflation.

First of all, "high" is a relative word, subjective to a person's interpretation. You, with your plush life style might not think an extra $.20 on a frozen dinner might be high. I assure you that SNAP participants do. This is, of course, going with the idea that CPI is a true representation of inflation, which it is not.

Second, by most people's standards, inflation has been high over the last 10 years.

Third, wages among those with the highest percentage of disposable income going towards food, have NOT kept up with this inflation. You and I are just fine. I reiterate my statements I've thrown at you on numerous occasions - for a liberal who is supposed to care about the little guy, you care surprisingly little for your fellow man.

 

[Tsing Tao]

Quote from Ricter:

Employers to raise worker pay by 2.9% next year
By Les Christie @CNNMoney July 16, 2013: 9:24 AM ET

<img src="http://i2.cdn.turner.com/money/dam/assets/130715140242-pay-raises-071513-620xa.png">

"NEW YORK (CNNMoney)
"Despite a strengthening economy, pay raises next year will only be slightly more generous than they have been over the past few years.

"Employers anticipate increasing worker salaries by an average of 2.9% in 2014, just marginally better than the 2.8% boost they gave this year, according to an annual survey of 1,500 mid-size and large U.S. employers by consulting firm Mercer.

"While a vast improvement from 2009, when raises averaged 2.1%, the expected pay increases are still a far cry from mid-2000 levels when they averaged around 3.5%, according to Catherine Hartmann, a principal in Mercer's Rewards consulting business.

"That's partly due to the still high unemployment rate. In June, the unemployment rate was 7.6%, meaning employers in many industries still have the upper hand when it comes to hiring and can easily recruit and retain employees without increasing salary offers.

Related: Cities with the biggest pay hikes

"Also weighing on wages are increased costs tied to retirement and health care benefits, which leave less available money for salary increases.

"This is the new normal," said Hartmann. "This is the way things have settled in."

"To remain competitive, however, employers will eventually have to increase pay, especially among top performers.

"Employers recognize that their greatest challenge is to retain their top performers to avoid post-recessionary flight," said Jeanie Adkins, who is a partner in Mercer's Rewards practice. "This means they have to reward them." More >>

Where's the survey data for that article? Where's the backup? I'd be willing to bet this is based on Fortune 500 companies, and not inclusive of small businesses, which is where a good portion of Americans work. You know, the businesses that are in distress. Also, too bad for those on fixed income. Or those on SNAP. Or those on other forms of welfare. What's the COLA increase, Ricter?

More evidence that the disparity between upper level income and the ones who need it gets greater.

Edit: sure enough it's mid-size and large cap business. As I thought.

 

[Ricter]

Quote from Tsing Tao:


More evidence that the disparity between upper level income and the ones who need it gets greater.

That's true, but now you sound like a commie. : )