True inflation figures?

[AisA1787]

Can anyone provide information or links to articles comparing CPI inflation over the past five or so years to "actual" cost-of-living inflation? I've done some Google searches but can't seem to find any reliable information.

 

[fsk]

I mention this on my blog. It's better to use M2 or M3 as your inflation index instead of the CPI.

http://fskrealityguide.blogspot.com/2007/12/real-gdp-growth-has-been-negligible.html

http://fskrealityguide.blogspot.com/2007/11/real-annual-income-is-decreasing.html

 

[Green Mountain Boy]

For true inflation figures, lookup "total credit market debt."

 

[merlin]

You might want to examine the work of John Williams

http://www.shadowstats.com/cgi-bin/sgs?

who attempts to reconstruct honest government economic numbers as they used to be reported.

 

[DamianTV]

The M3 isnt available any more. Teh Fed no longer gives Congress any measure as to how much currency is in circulation.

http://www.youtube.com/watch?v=A4kxTkhwR_Q

Well look at that. Even RP says we do not have access to the M3. We cant even honestly tell how much inflation is right now. Betcha its well over 10%. Hope your money market accts get better than that on the returns...

 

[Tom228]

The M3 isnt available any more. Teh Fed no longer gives Congress any measure as to how much currency is in circulation.

http://www.youtube.com/watch?v=A4kxTkhwR_Q

Well look at that. Even RP says we do not have access to the M3. We cant even honestly tell how much inflation is right now. Betcha its well over 10%. Hope your money market accts get better than that on the returns...

If inflation was truly over 10% we'd be in extreme recession right now. Bit of an overstatement.

 

[boberino]

If inflation was truly over 10% we'd be in extreme recession right now. Bit of an overstatement.

Possibly.

 

[Malakai0]

From a working and trying to pay for school with income from a relatively low paying job, including gasoline costs, it sure feels like recession now. Similar conditions last year I at least could afford a few presents for people and something for myself.

This year, flat broke, despite making a bit more an hour than this time last year. Rising bills, insurance costs, GAS costs (I have to drive an hour each way for next step of college, fuel costs insane and going nowhere but up), medical costs. I'm in florida so don't forget insurance increases across the board (thanks so much Mr Christ...).

The higher paid middle class guys with families I work with are struggling even worse. It's really sad when I have more cash on hand after the bills and other obligations are paid off, compared to someone making doubt the money and 25% more hours.


Anyway though I paid for my associates @community college all myself with no debt, the bachelors from USF under current conditions is going to require loans.
I'm pretty worried overall about what's coming and where I'm going to go from here. With so many friends out of work or in terrible jobs I'm worried about losing my current job over schedule changes for school too.

 

[freest8r]

Bogus CPI

Since the Fed doesn't allow anyone to see the M3, there's no way to know with a certainty the actual inflation numbers, but I think the 10% figure is probably close, especially if you look at the last 6 months or so. I think we don't see a major recession right now because we're still in the early stages. The market is currently reaping the benefits of the higher inflation, but that can't last forever. Plus, if these are the "good times" I'm not looking forward to the bad.

Here's some more info on the CPI, which I posted on another thread awhile back. The CPI is a complete joke, and I can't believe that ANYONE even refers to it anymore.

I just want to respond to the discussion about the government reported inflation rate. It's based on a government calculated CPI (Consumer Price Index), and the products and services that are included in the CPI change every month based on whatever will make the numbers look good. For example, gasoline and health care costs are NOT included, in addition to other "volatile" products that get swapped in and out of the CPI on a monthly basis.

Think about it. The government stands to benefit the most from positive economic figures, and the government controls how those figures are calculated. By manipulating what gets included in the CPI the government can under-report inflation, and over-report production. Here's an exellent article that explains how this is done. Check out Table 2, in particular:

http://www.mises.org/story/2302

The government also uses a technique called "hedonics" to factor in improved performance in automobiles and computers. They also use "substitution" to try to predict what a consumer might do when faced with higher prices. The bottom line is, these adjustments just allow them to manipulate the true economic statistics, and are based on nothing more than some statistician's whim.

Here are two articles that discuss hedonics and substition as they relate to the government's bogus inflation statistics.

http://moneycentral.msn.com/content/P72746.asp
http://moneycentral.msn.com/content/P73981.asp

Lastly, check this out, straight from the BLS (Bureau of Labor Statistics). Here's an example of how they use "substition". In effect, they can simply substitute out the goods that show large price increases until the final numbers look they way the government wants them to.

Substitution can take several forms corresponding to the types of item- and outlet-specific prices used to construct the basic indexes. . . . Thus, in response to an increase in the price charged by a store for a certain brand of ice cream, a consumer could respond by:

Redistributing purchases:
To another brand of ice cream whose price had not risen.

To a larger package of ice cream with a smaller price per ounce.

To ice cream at a different store where ice cream is on sale.

To a brand of frozen yogurt.

The consumer also could respond by postponing the ice cream purchase until a later date.

Finally, the consumer could substitute from the ice cream brand to a specific alternative dessert item, such as cupcakes or apples, which is another CPI category.

This latter form of substitution, although across CPI categories, would still have the effect of reducing the quantity consumed of the higher-priced ice cream brand relative to the quantities of other items within the ice cream stratum. . . . In the same way, the use of the geometric mean formula within categories does not address the issue of whether consumers can, or do, respond to a general increase in the price of ice cream products by, for example, forgoing dessert.

-- Quotes are from a BLS document, "Incorporating a geometric mean formula into the CPI." The emphasis is mine.

 

[Green Mountain Boy]

Not good...

 

[NorwegianLibertarian]

Why does it say 1929 when the peak is at around 1934?

 

[Tom228]

Once again, if our inflation was truely ~300% we'd be in like a major Depression.

Truthfully I fail to see how swome of yall use MX(1,2,3) to prove inflation rates. Since inflation is a rise in prices. As far as I understand is deduced by CPI.

 

[fsk]

The problem is that the CPI is biased and manipulated. The CPI understates the true inflation rate.

M2 and the suppressed M3 are the truest measure of inflation. They are, literally, the measure of how much money there is.

If you print more money, prices go up. It's simple when you explain it that way.

 

[kiss]

M2 and the suppressed M3 are the truest measure of inflation.

I am getting more and more interested in Austrian Money Supply (pdf), altough it seems hard to measure. Any comment on AMS or MZM?

 

[davver]

First, CPI is manipulated. Try www.shadowstats.com or www.nowandfutures.com for beter info.

Second, inflation is the increase in the supply of money. True CPI will, over the long run, reflect this. We have experienced lower inflation then money supply growth due to foriegners willingness to import our dollars (our inflation). They are no longer willing to do this, which means those dollars are comming home.

 

[fsk]

I don't like MZM because it's a subset of M2. I haven't heard of AMS before.

I consider M3 to be the "most accurate" money supply measure.

 

[truelies]

If inflation was truly over 10% we'd be in extreme recession right now. Bit of an overstatement.

First thing ya gotta do is define Inflation which is simply an increase in the Money Supply. Even a precious metals currency can thus suffer inflation. That may or may not result in an increase in the prices of various Goods/Services relative to incomes/wages. BTW DEFLATION is even harder (far harder) on the average person than is a modest rate of inflation.

 

[davver]

First thing ya gotta do is define Inflation which is simply an increase in the Money Supply. Even a precious metals currency can thus suffer inflation. That may or may not result in an increase in the prices of various Goods/Services relative to incomes/wages. BTW DEFLATION is even harder (far harder) on the average person than is a modest rate of inflation.

This is simply not true. Rapid deflation that follows rapid inflation is difficult to adjust for (the great depression). However, the gradual and predictable deflation that occurs under a 100% gold backed currency isn't. The period from 1871-1896 was one of the strongest economic growth periods in American and world history, and it was marked by stead 1-2% yearly deflation. There are many other examples throughout history.

 

[truelies]

This is simply not true. Rapid deflation that follows rapid inflation is difficult to adjust for (the great depression). However, the gradual and predictable deflation that occurs under a 100% gold backed currency isn't. The period from 1871-1896 was one of the strongest economic growth periods in American and world history, and it was marked by stead 1-2% yearly deflation. There are many other examples throughout history.

Hmmmm, conditions 1871 - 1896 were rather harsh for the working/small farmer vast majority of Americans with frequent Panics that again for the little guy caused grief worse than the Great Depression. BTW what you are calling DEFLATION was if I am not mistakem merely a decline in what we now call CPI NOT a decline in Money Supply. One of the things that made the Great Depression so painful was the real decline in the Money Supply. No good comes from reducing the MS be it based on Gold or electrons in a computer entry. Fiat money is not a problem if the MS growth is geared to the economy's growth in output of Goods/Services.

 

[Truth Warrior]

http://www.measuringworth.com/inflation/