Deflation...

[piezoe]

OKI-DOKI, so when you say "the everyday experience of most of us", I am genuinely curious. Tuition fees apart (the official CPI for tuition, school fees and childcare has in fact been running at well above 5% YoY throughout the 1990s and 2000s), have you collected any data on your "everyday" experience?

The reason I ask is that I am actively involved in the inflation mkts. I spend a great deal of money and effort to collect timely and accurate data on prices. So I am always very curious for whatever information on actual inflation people might have.

Yes, those things are amazingly close to the Williams CPI estimates for what he claims are CPI figures as they would have been calculated using the method of the mid-nineteen eighties, but of course those things alone don't make an economy. For example, as you would know, if you throw into the mix electronic devices and use hedonics your going to get lower numbers for the composite.

I haven't personally collected any data on "everyday experience." I did my study of College tuition because there were so many headlines re "skyrocketing" tuition, yet I knew that colleges and universities were struggling financially. I was curious. I didn't collect any data for that study, I just used the government BLS figures as well as Williams' numbers, so if they are wrong then my results are wrong. I gave the results to colleagues here in the administration of our local University and also posted them on ET. You get skyrocketing tuition by using the governments composite CPI calculated using current methods, and you get tuition just mirroring inflation using the Williams numbers.

This anecdote may be of interest to you. Two weeks ago my piano tuner told me that grand pianos had gone up 5% a year just like clockwork for the past couple decades. I was astounded when he told me that mine, new, had more than tripled in value over what I had paid for it over twenty years ago, and that used it had more than doubled in value. Should we be investing in grand pianos? If he's correct, than this is yet another item that is inflating at a greater rate then the headline government CPI.

I thought this was an interesting remark: " Why should I, as a self-interested capitalist, care about middle and lower classes?"

I suppose the rejoinder to that is that as a self-interested capitalist you wouldn't necessarily care about the middle and lower classes, but if you had any interest at all in your capitalist posterity you might be making a mistake not to care.

 

[trefoil]

It strikes me that the US could go through a period of deflation. Whether or not that’s entirely a bad thing remains to be seen I suppose. I know it’s anecdotal in a way, but retailers reported that they needed to heavily discount products to get consumers over Christmas. The average consumer just doesn’t have the money to keep companies reeling in record profits.

Brick & mortar problem, especially for the perennially helpless, like JCP and SHLD (Sears & K-Mart). Others are starting to struggle: BBBY, BBY, TGT, and even WMT. Outside of Black Friday, for the past couple of years, they have major trouble getting people to visit their stores. Online is killing them, and causing delivery problems for UPS and FedEx.
CONN is interesting though.

 

[tradingjournals]

Although it seems that the actual price inflation experienced by middle class Americans reflects the Williams numbers more closely than the official government CPI, Williams can be fairly criticized for his very empirical means of adjusting the government CPI to what he considers to be the CPI as it would have been computed by the government in the mid 1980s. He does it by simply adding a constant to the government figure!

Another point that he can be fairly criticized on is his ignoring of the legitimate reasons for, and advantages to the economist, of changing the method of computing price increases to take quality into account. Nevertheless his numbers seem closer to the everyday experience of most of us. And too when the Williams numbers are compounded they reproduce to high accuracy the actual increase experienced in College and University tuitions. I have done those calculations myself, and was rather astounded at the good agreement.

You/others may be making a simple problem more complex. Why not just follow the price of a postcard stamp?

An additional advantage to using the postcard stamp method is that one can easily assess the decline in income and in the price of labor since 1950s. Average income in 1950s was about 450K stamps per year, and now it is about 150K stamps a year.

Capitalist had the odds on their side: declining interest rates, and a declining cost of labor. How could one not make tons of money when the inputs are heading down, and the price of what one outputs is rising?

 

[tradingjournals]

OKI-DOKI,
The reason I ask is that I am actively involved in the inflation mkts. I spend a great deal of money and effort to collect timely and accurate data on prices. .

If I were you, I would find the effort to collect data not needed, the money spent on it a waste, and the effort more likely worthless.

 

[Martinghoul]

I thought this was an interesting remark: " Why should I, as a self-interested capitalist, care about middle and lower classes?"

I suppose the rejoinder to that is that as a self-interested capitalist you wouldn't necessarily care about the middle and lower classes, but if you had any interest at all in your capitalist posterity you might be making a mistake not to care.

My question was mostly rhetorical, actually...

 

[Martinghoul]

If I were you, I would find the effort to collect data not needed, the money spent on it a waste, and the effort more likely worthless.

Well, you are not me and you know nothing about the subject. If I were you, I'd hesitate before volunteering opinions formed of ignorance.

You/others may be making a simple problem more complex. Why not just follow the price of a postcard stamp?

An additional advantage to using the postcard stamp method is that one can easily assess the decline in income and in the price of labor since 1950s. Average income in 1950s was about 450K stamps per year, and now it is about 150K stamps a year.

How does this make any sense? If everyone starts using email and stops sending letters/postcards (as they have), what are you gonna do with your "method"?

 

[trefoil]

Simple theory: inflation will always be perceived as higher than the stats for two reasons:

1 - There's stuff that always goes up regardless, like medical bills, real estate taxes, rent.
2 - Inflation is worst at the two ends where it hurts most: when you're first starting out - college tuition - and when you're retiring - medical bills and the cost of medicine and nursing care.

So really, no matter if there's actual deflation, people will still perceive inflation, because for the stuff that's really important at the times of life when you're most vulnerable, inflation never stops.

 

[tradingjournals]

2 - Inflation is worst at the two ends where it hurts most: when you're first starting out - college tuition - and when you're retiring - medical bills and the cost of medicine and nursing care.

.

That is why in europe and canada they have socialize the situations you listed.

 

[tradingjournals]

Well, you are not me and you know nothing about the subject. If I were you, I'd hesitate before volunteering opinions formed of ignorance.

How does this make any sense? If everyone starts using email and stops sending letters/postcards (as they have), what are you gonna do with your "method"?

You did not seem to have understood what I wrote.

 

[Martinghoul]

You did not seem to have understood what I wrote.

That's certainly a possibility. Alternatively, it's possible that you don't know what you're talking about and are very confused. You should consider both possibilities carefully.