He's lives in a land beyond reason. There are certainly arguments that intelligent well meaning people can make about CPI methodology. But, you have to realize that there is a methodology and understand what it is, as well as be intelligent and well meaning, to make those arguments. I fear that @S2007S doesn't meet any of those criteria. Last time I had this discussion it devolved literally into "but, but now they sell sugar in 4 pounds sacks and they used to be 5"; that was the best the conspiracy theorists could come up with (https://www.elitetrader.com/et/threads/rates-unchanged.294369/page-8 for your entertainment)
Still begging for a huge rate cut and QE! Simply amazing.
- Thread starter S2007S
- Start date
Well, you clearly don't believe that otherwise you would have stopped posting here long ago.
If you look at the actual weightings for healthcare, education, and child care that are used to calculate the index, all those components which have been inflating rapidly receive small weightings.
https://www.bls.gov/cpi/tables/relative-importance/2018.pdf
Childcare is a significant expense for most people who have children. But it receives less than a 1% weighting. College tuition and fees are right around 1% even though there is currently about $1.52T worth of student loan debt, 44.2 million people owe debt, and the average student loan debt is $38k as of last June (https://en.wikipedia.org/wiki/Student_debt). But motor fuel is around 4% so it receives about 4X more weighting in the CPI than college education. Then there are ridiculous measures of recreational spending such as photography and photography supplies as well as sewing machines, fabrics and supplies. Health insurance is another significant cost for most people, but it's less than 1% weighting. So while I don't disagree with the inflation rate that they calculate for college education or medical service components, they practically ignore those components when they calculate the overall CPI by assigning them low relative importance.
The other issue that I have with it is that there is a lot of subjectivity that they introduce through attempts find substitutes for items no longer produced or widely consumed (probably sewing machines). They will also "credit" newer goods with having additional value due to claimed higher quality over older goods (this scheme also artificially boosts GDP). While it's true that a television from this year has more features than a comparable television from 10 years ago, they try to adjust the cost of the newer TV lower by claiming that the consumer is getting more than they were years ago. That's true, but what's the exact value of the utility gained? There are so many assumptions that go into the CPI measurement and each assumption allows for error. It's easier to manipulate a complex model than a simpler model. I suppose that I don't want to claim that it's intentional so I'll walk that claim back simply because I don't know and was only half-way serious about it anyway. However, there certainly is motive for the govt to hide inflation to reduce all payments that are adjusted for inflation as well as keep interest rates low. Better measure of overall inflation: cost of Big Mac over time. Very simple model.
With all due respect but you are an ignorant idiot. Has it occurred to you that the CPI basket is not designed only for families with children? There are only 74 million children and with an average of 1.9 kids per family a minority of Americans have kids. Hence most Americans are not subject to education and child care costs to start with. The cpi basket applies to ALL Americans. Hence the weights for education and child care are larger for families with kids than the cpi basket suggests. Do you follow so far? You are the entire time arguing a biased view from your own perspective how how you think an average American is exposed to products in the CPI basket. When you argue economics and statistics you need to divorce yourself from your own little self and life and start looking at averages and variations around averages.
Also the CPI basket does not make assumptions about utility. It is a COST basket meaning it measures the cost of a basket of products an AVERAGE American consumes.
The government does not hide anything intentionally in the CPI basket. Such baskets are by definition behind the current state. Same as a moving average, same as the Fed with its decisions, same as many aspects of life that cost a lot to adjust and hence lag in catching up to consumer trend changes
Do you try to be idiotic on purpose or is it that you just can't help yourself?
Also the CPI basket does not make assumptions about utility. It is a COST basket meaning it measures the cost of a basket of products an AVERAGE American consumes.
The government does not hide anything intentionally in the CPI basket. Such baskets are by definition behind the current state. Same as a moving average, same as the Fed with its decisions, same as many aspects of life that cost a lot to adjust and hence lag in catching up to consumer trend changes
Do you try to be idiotic on purpose or is it that you just can't help yourself?
Well, you clearly don't believe that otherwise you would have stopped posting here long ago.
If you look at the actual weightings for healthcare, education, and child care that are used to calculate the index, all those components which have been inflating rapidly receive small weightings.
https://www.bls.gov/cpi/tables/relative-importance/2018.pdf
Childcare is a significant expense for most people who have children. But it receives less than a 1% weighting. College tuition and fees are right around 1% even though there is currently about $1.52T worth of student loan debt, 44.2 million people owe debt, and the average student loan debt is $38k as of last June (https://en.wikipedia.org/wiki/Student_debt). But motor fuel is around 4% so it receives about 4X more weighting in the CPI than college education. Then there are ridiculous measures of recreational spending such as photography and photography supplies as well as sewing machines, fabrics and supplies. Health insurance is another significant cost for most people, but it's less than 1% weighting. So while I don't disagree with the inflation rate that they calculate for college education or medical service components, they practically ignore those components when they calculate the overall CPI by assigning them low relative importance.
The other issue that I have with it is that there is a lot of subjectivity that they introduce through attempts find substitutes for items no longer produced or widely consumed (probably sewing machines). They will also "credit" newer goods with having additional value due to claimed higher quality over older goods (this scheme also artificially boosts GDP). While it's true that a television from this year has more features than a comparable television from 10 years ago, they try to adjust the cost of the newer TV lower by claiming that the consumer is getting more than they were years ago. That's true, but what's the exact value of the utility gained? There are so many assumptions that go into the CPI measurement and each assumption allows for error. It's easier to manipulate a complex model than a simpler model. I suppose that I don't want to claim that it's intentional so I'll walk that claim back simply because I don't know and was only half-way serious about it anyway. However, there certainly is motive for the govt to hide inflation to reduce all payments that are adjusted for inflation as well as keep interest rates low. Better measure of overall inflation: cost of Big Mac over time. Very simple model.
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Cite your source. From the US Census:
"It found more than 60% of the 121 million adult men in the U.S. were fathers."
(https://www.stgeorgeutah.com/news/a...ntage-of-us-men-who-are-fathers/#.XVzcfOhKgVA)
So unless all those fathers had children with a much smaller pool of mothers, child care costs are not insignificant and do not affect only a small minority of the population. Of course, a lot of those 74 million children will grow up and have children of their own someday. So if childcare costs go up 30% over a few years (increase in min wage could do that in some areas), then that will obviously affect a lot of people. But a big increase in a factor that has less than 1% weighting on the CPI won't show a lot of inflation. The weightings are calculated via surveys. The BLS decides which groups of people / demographics / areas to survey. Since they design that survey, they have the influence to skew results although not necessarily intentionally. Look at how many surveys by reputable agencies specialized in conducting surveys called the last election wrong. Since the weightings are smaller than I would expect for important categories, I simply question their accuracy. I suspect a bank with access to more consumer data might be able to better track inflation.
Google yourself, avg household size in US and number children (18 years and younger) in US. Very simple. It's a perfectly chosen statistic to gauge how significant child care costs are to American adults. Even my chosen figures are hugely inflated regarding child care cost as no teenager incurs child care cost. If you want to focus on education costs including college then we can later on move to that but we first tackle the specific item of "child care expenses"
Your statistic is even more idiotic than your previous one. You try to make the point that child care and education costs are underrepresented in the CPI basket. Then you pull a statistic out of your arse that shows how many adult men are fathers. Conveniently you omit or probably did not even think of that all fathers, even those of grown adult sons and daughters, are counted in your statistic. Do you want to use your brain? Because otherwise I prefer to not further converse with you on this topic.
Your statistic is even more idiotic than your previous one. You try to make the point that child care and education costs are underrepresented in the CPI basket. Then you pull a statistic out of your arse that shows how many adult men are fathers. Conveniently you omit or probably did not even think of that all fathers, even those of grown adult sons and daughters, are counted in your statistic. Do you want to use your brain? Because otherwise I prefer to not further converse with you on this topic.
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First off I want to specify that these are the kinds of intelligent, well meaning people discussions about this subject when we get to actual methodology. They're a far cry from the previous assertions that massive swaths of the economy simply aren't measured made by people who haven't the faintest clue about the measurement system.
With that in mind, I think it's important to agree that CPI is and no matter what will always be an imperfect measure. It's certainly imperfect if you want to gauge the impact of inflation you you specifically, because unless you're an exactly average American, which from the methodology is nearly impossible, you'll be impacted more in some areas and less in others than the average American. That doesn't make the methodology faulty. To your example, I'm a father, I paid childcare costs for a grand total of 7 years when my kids were between the ages of 0 and 6, plus let's add the cost of summer day camps and say I also paid for 1/3 of the year from ages 6 to 12. So assume I live the average male age of 78 years, I was impacted by childcare cost inflation for 10 years, or 13% of my life. If 60% of adult men are fathers, and they're impacted for 13% of their lives, that's 8% of the population at any given time that's even exposed to that cost at all. Even if my numbers are off by half, you're still talking about an inflation that should have a fairly low weighting because for an average American averaged over their lifetime it's a small part of their lifetime outlay on cost of living.
The issue of newer better products is another one without a perfect answer. A perfect example of this is prescription drug costs, which we all agree are inflating at a rate far higher than general inflation. But are they really? How much does the exact same high blood pressure drug someone took in 1999 cost today vs then? A tiny fraction, in fact if you tracked the price of drugs individually they deflate massively when they go off patent. So if you decided that the BLS should not account for improvements, just blindly track the change in price of of products that were available both in year X and today, you'd get a wildly unrealistic view of this segment, for sure. In fact nearly the entire medical field suffers from this, the cost of medical care isn't actually going up if you compare like for like. If you were OK to settle for 1980s level cancer treatment you wouldn't pay much for it. But we all want the latest greatest, and because the latest greatest is getting more and more sophisticated it costs more and more.
Similar but somewhat different angle with electronics. If we wanted to make the original flip phone at scale today it would cost a buck, so do we massively deflate the cost of phones? And if I gave you the choice of a mint condition, never used flip phone with no historical value (and assumed the networks still existed to use it on) or a new smart phone, you'd clearly be willing to pay more for the new smart phone, or at least an average consumer would, so it would be silly to say that you shouldn't account for that increase in value the market is attributing to the increase in features. The right answer is somewhere in the middle, and has to be somewhat subjective, but the fact it's subjective doesn't make it invalid. It's simply the best solution we have to a problem that doesn't have a perfect solution.
A couple of asides, the Big Mack PPP model is a thing the Economist does only somewhat tongue in cheek. It's a decent rough model, but goes wildly out of whack in a few places for a few reasons.
Free of charge? Cool. So you are going to fix all these conspiracy theories? You believe 2% inflation?
Speaking of education and healthcare. Just those two increases over the last two decades are enough to swallow up any decrease in any other goods and services out there.
Do those figures include all those foods that have decreased there size of packaging where you get 10 ounces of cereal for $3.99?? Or 48 ounces of ice cream instead of the usual gallon. Or the Tropicana that used to be 64 oz that's now only 59oz. Reduce size but increase price. Of course the dumb consumers won't know the difference!
This is fucking hilarious! Exactly as I said in post 21 of this thread, the 4 lb bag of sugar that used to be 5 is literally what they're basing their beliefs on, having not only never read the methodology but not even being aware it exists! As if the guy who does nothing in life but track the price of consumer commodity products is too dumb to normalize them to a per unit price, but thank god for @S2007S and the mental giants he travels with, they're the only one's who could figure out such a complicated subject! What would we do without them!
To be honest at this point it's just depressing to be able to predict their idiocy with such a high degree of accuracy.
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Haaaaa
These headlines are just great today!!!
Trump appears to laud Germany’s negative yields, says country is ‘being paid to borrow money
https://www.cnbc.com/2019/08/21/tru...ys-country-is-being-paid-to-borrow-money.html
These headlines are just great today!!!
Trump appears to laud Germany’s negative yields, says country is ‘being paid to borrow money
https://www.cnbc.com/2019/08/21/tru...ys-country-is-being-paid-to-borrow-money.html